Lithium mining stocks wind unboiled water from the world's largest lithium producer is bearish on lithium prices? Organization: misunderstanding!

Yabao, the world's largest lithium producer, mentioned "We expect our Lithium business to experience lower pricing in 2021 (lower pricing for lithium business)" in its fourth-quarter operating update, which stirred up a thousand waves and attracted a lot of attention in the market.

It is reported that the concentration of global lithium resources is relatively high, and the main production capacity is monopolized by four monopolies: Yabao of the United States, Fumei of the United States, Talison of Australia (51% of Tianqi Lithium Industry, 49% of Yabo) and Chilean Mining and Chemical SQM (25% of Tianqi Lithium), accounting for about 90% of the world's production capacity.

Yabao can be said to be an unyielding giant of the lithium industry, and the predictability of the industry is also extraordinary.

If the lithium giant decides to be bearish on the market price of lithium carbonate in 2021, it will undoubtedly be bearish for A-share lithium mining stocks. It is with the bottoming out of domestic lithium carbonate prices in the fourth quarter of 2020 that A-share lithium mining stocks have taken advantage of the situation. At the beginning of November, Ganfeng Lithium shares hit record highs from around 60 yuan, rising to as high as 149.3 yuan. Tianqi Lithium, which is mired in debt crisis, more than tripled in three months.

But analysts believe this interpretation is too arbitrary.

Xie Honghe, an analyst at Zhongtai Securities, said that unlike the domestic business model, overseas lithium salt producers mostly sell long orders and usually negotiate the price for the coming year at the end of each year, which makes the sales price of lithium salt in overseas enterprises obviously lag behind the domestic market. In fact, the selling price of that year is still reflecting the changes in the spot market of the previous year to some extent.

This feature can also be seen directly from the changing trend of the sales price of Yabao lithium salt. The domestic lithium carbonate market price in 2019 is in the process of unilateral decline, and the average market price is 42% lower than the same period in 2018, while the average sales price of Yabao is basically the same as that of the same period in 2018. This may be because the long-term agreement price of lithium salt in 2019 was signed at the end of 2018. The price in 2020 really reflects the price decline in 2019.

Based on this logical calculation, Xie Honghe said that the price of Yabao's own lithium salt association in 2021 was signed at the end of 2020, and it was only natural that the average sales price was lower than the 2020 price: the 2020 long-term agreement price was about US $10, 000 per tonne, while the domestic spot market price was only US $6000 per ton. This obviously does not mean that lithium giant Yabao is bearish on the market price of lithium carbonate in 2021.

Xie Honghe continues to reiterate that the upward trend of lithium carbonate prices is clear and is optimistic that stock price fluctuations will bring better opportunities for intervention. Xie Honghe said that the decline in corporate capital expenditure in 2020 led to a shortage of effective supply of resources from 2021 to 2022, and global sales of new energy vehicles continued to exceed expectations since the second half of 2020. Under the benchmark assumption of global sales of about 4.5 million new energy vehicles in 2021, there is a dominant gap of about 5 per cent in 2021. If the gap is more than 10 per cent taking into account the endogenous replenishment demand of enterprises, the upward trend of lithium carbonate is clear. It is still in the first half of the upward cycle.