SMM, July 17:

The epidemic that occurred at the beginning of this year has had a great impact on the global economy and industrial development. For the cobalt lithium new energy industry, the market supply and demand structure has also undergone significant changes. However, since March, China and Europe have issued optimistic policies for the new energy vehicle industry, which undoubtedly releases a positive signal for the future development of "electrification". In this way, the SMM new energy analysis team investigates and integrates the production data of China's core battery materials, summarizes the trend characteristics combined with the price trend, and makes a judgment and forecast of the price trend in the second half of 2020.

This is the second part of a series of analysis reports, which describes the core data conclusions and forecasts of the lithium industry.

From January to June 2020, China produced 73000 tons of lithium carbonate, an increase of 5.8 percent over the same period last year, including 46000 tons of battery-grade lithium carbonate and 27000 tons of industrial-grade lithium carbonate. SMM expects China's lithium carbonate production in 2020 to be 170000 tons, an increase of 11 percent over the same period last year.

From January to June 2020, China produced 44000 tons of lithium hydroxide, an increase of 4.7 per cent over the same period last year. SMM expects China's lithium hydroxide production in 2020 to be 110000 tons, an increase of 30.3% over the same period last year.

In the first half of 2020, the average price of SMM battery-grade lithium carbonate was 46000 yuan / ton, down 40.2% from the same period last year. The average price of SMM battery-grade lithium hydroxide was 55000 yuan per ton, down 44.1 percent from the same period last year. SMM believes that the price of lithium carbonate has been oversold, but the current inventory pressure in the industry is still forcing prices down to force excess capacity to clear. SMM estimates that battery-grade lithium carbonate may fluctuate between 3.6 yuan / ton and 42000 yuan / ton in the second half of the year, taking into account the technological transformation of some electric carbon enterprises to reduce production costs, as well as the potential impact of imported lithium carbonate on the domestic market. High-quality battery-grade lithium hydroxide will still have a significant premium over battery-grade lithium carbonate, while the premium of other battery-grade lithium hydroxide over battery-grade lithium carbonate may continue to narrow.

Output of Lithium Carbonate in China from January 2019 to June 2020

At present, the production capacity of lithium carbonate in China is 364000 tons, and Yongxing New Energy was successfully put into production in the first half of the year. The production capacity of salt lake enterprises such as Tibet Lithium Industry, Hengxinrong Industry and Qinghai Lithium Industry is relatively smooth. In the next two years, Changhehua Lithium, Zhiyuan Lithium, Lanke Lithium, Tangshan Xinfeng, Dongpeng New Materials, Nan's Lithium and other enterprises have plans to expand production.

From January to June 2020, China produced 73000 tons of lithium carbonate, an increase of 5.8 per cent over the same period last year. Among them, the output of battery-grade lithium carbonate is 46000 tons and that of industrial grade lithium carbonate is 27000 tons. In terms of raw materials, lithium extraction from spodumene accounted for 51.6 percent, down 8.1 percent from the same period last year; lithium from salt lakes accounted for 26.1 percent, up 3.9 percent from the same period last year; and lithium from lithium mica accounted for 22.4 percent, an increase of 4.2 percent over the same period last year. The output increment of lithium carbonate in China in the first half of the year mainly comes from Guangdong Weihua, Nanshi Lithium Power, Yongxing New Energy, Hengxin Rong, Minmetals Salt Lake, Tibetan Lithium Industry and other enterprises.

At the beginning of the year, due to the approach of the Spring Festival holiday, ore lithium extraction enterprises have maintenance plans of half a month or more, and smelters in Jiangxi and Sichuan began to stop production in late January. Since then, affected by the epidemic, smelters in Jiangxi and Sichuan have been prevented from returning to work and passively reduced production. Qinghai is far away from the epidemic areas, but due to the influence of the weather, there are already a small amount of production reduction plans in winter, while some enterprises consider inventory levels to take the initiative to reduce production.

With the domestic epidemic gradually under control in March, the resumption of work in various places has been carried out smoothly, and the operating rate in Jiangxi, which had previously been relatively serious, has recovered rapidly, and the operating rate of some enterprises has also increased as the weather in Qinghai gets warmer. However, due to the slow improvement of terminal demand in the market and the lack of full production power, some spodumene enterprises started maintenance in April, and considering that the price of lithium salt still has a downward trend, production has not resumed yet. Some large factories have sufficient overseas orders for lithium hydroxide and have more profitability than lithium carbonate. Their front-end production lines have been adjusted to reduce the monthly production of lithium carbonate and gradually increase the production of lithium hydroxide to meet the needs of their customers.

In contrast, Qinghai and Jiangxi regions rely on the advantage of raw material costs to increase significantly, and continue to improve the production line to continue to reduce costs. Among them, Nanshi Lithium increased its production through new tunnel kilns and rotary kilns, and was put into production in June; after Yichun Silver Lithium carried out technical transformation and commissioning of the lithium mica lithium carbonate production line, its monthly production capacity of a single production line has been increased from 400 tons to 500 tons; Lanke Lithium production continues to increase due to the warm weather in Qinghai.

SMM believes that, taking into account the cost differences between different raw materials and the trend of lithium carbonate homogenization, we expect that lithium carbonate emissions in China will still mainly come from salt lake brine and lithium mica in the second half of the year. China's lithium carbonate production in 2020 was 170000 tons, an increase of 11% over the same period last year.

Output ranking of H1 Chinese Lithium Carbonate production Enterprises in 2020

据SMM统计，中国碳酸锂Top 5生产企业市占率为56%，相比于2019年集中度有所下滑。随着盐湖与云母企业的放量，及更多新企业的投产，中国碳酸锂市场竞争格局不断加剧。

Output of Lithium hydroxide in China from January 2019 to June 2020

At present, the production capacity of lithium hydroxide in China is 214000 tons, and the capacity increment mainly comes from enterprises such as Tianyuan in Guangxi. New domestic production capacity in the next two years: Ganfeng lithium industry, Zhiyuan lithium industry, Tianyi lithium industry, Tangshan Xinfeng and so on.

From January to June 2020, China produced 44000 tons of lithium hydroxide, an increase of 4.7 per cent over the same period last year. The output increment comes from Ganfeng lithium industry, Yabao lithium industry, Tianqi lithium industry and other enterprises. Considering that it will take some time for the new capacity to be put into production, it is expected that the supply of lithium hydroxide will be mainly concentrated in the head big factories in 2020, and the global demand for high nickel will increase rapidly and the output growth rate will increase significantly with the entry of foreign car companies in the next two years.

At the beginning of the year, Jiangxi Lithium hydroxide Factory maintained full production in order to complete the post-holiday delivery. However, most of the domestic lithium hydroxide smelters are located in Jiangxi, and the output was reduced by about half a month in February affected by the epidemic. After the release of restrictions on resumption of work, in order to complete overseas long orders and domestic orders, large factories have returned to full production one after another. In the second quarter, some enterprises suspended production due to equipment debugging and sporadic market demand, mainly to remove inventory; Jiangxi large factories lithium salt front-end production line adjustment was officially completed, the monthly output climbed smoothly, and the overall supply of the industry increased.

Although the demand for lithium hydroxide slowed down in the first half of the year due to the impact of the epidemic, as more than 90% of the world's high-quality lithium hydroxide production capacity is concentrated in China, with the recovery of the European car market and the accelerated discharge of the Tesla Shanghai plant, the demand and output of battery-grade lithium hydroxide in China will still increase significantly in the second half of 2020. However, as the domestic high-nickel technology is still in the process of development, and according to SMM, domestic car companies will still take cost reduction as the main goal in 2020, superimposing the impact of the epidemic on the domestic consumer market, many models have switched to lithium iron phosphate system, and the growth rate of demand for lithium hydroxide may be slower than previously expected. However, with the commissioning of lithium hydroxide production lines such as Tianyuan, Yibin Tianyi and Ganfeng Lithium Industry in Guangxi in the second half of the year, as well as upstream stock preparation for high nickelization expectations, SMM expects China's lithium hydroxide production in 2020 to be 110000 tons, an increase of 30.3% over the same period last year.

Output ranking of Chinese Lithium hydroxide production Enterprises in 2020

当前国内氢氧化锂的原料来源相较于碳酸锂更为单一，主要以锂辉石精矿为原料，且电池级氢氧化锂当前通过下游认证仍需一定门槛，生产厂商集中度更高。据SMM统计，2020年上半年中国氢氧化锂Top 5生产企业市占率达到93%，相比于2019年有进一步的提升。

Price trend of Lithium Salt products in China from January to June 2020

Since the beginning of this year, the price of lithium salt in China has experienced two small rebounds. In the first quarter, as a result of the epidemic, production did not resume in time, logistics and accessories costs increased, prices rebounded slightly, and prices fell as supply resumed. The recent slight increase in the price of industrial-grade lithium carbonate is mainly due to the obvious recovery of demand for lithium iron phosphate since May, and the long-standing price gap between industrial power and carbon exceeding the purification processing fee, leading to an increase in purification demand. large factories have improved their own supply and demand structure to take the lead in price adjustment, and as the industry price has been in a state of overfall for a long time, other enterprises have taken the opportunity to raise prices. However, from the current market demand recovery speed, as well as the inventory situation, the price callback is more difficult, the arrival of the price trend callback inflection point needs to give the industry a certain inventory time. According to the cost curve and market operating rate, the price of battery-grade lithium carbonate is expected to fluctuate between 3.6 and 42000 yuan / ton in the second half of the year.

We believe that the lithium salt price in China in the second half of the year has the following characteristics: 1, battery-grade lithium carbonate enterprises using spodumene as raw material will be under cost pressure for a long time; 2, the inventory situation leads to the limited space for lithium salt price callback.

SMM battery materials research team

Qin Jingjing 021 Murray 51666828

Mei Wang Qin 021 Mui 51666759

Huo Yuan 021 Murray 51666898