The pace of production expansion in the middle and lower reaches accelerates the supply and demand of lithium resources or tightens for a long time [institutional review]

Core point of view

Lithium: the contradiction between supply and demand is difficult to solve, the global automobile electrification wave is accelerating, and the resource side is still one of the most prosperous links.

The main results are as follows: 1) the contradiction between supply and demand is intensified, and the operation continuity of high lithium price is strong. This week, battery-grade lithium carbonate rose to 200,000 yuan per tonne, while lithium concentrate rose 5.67 per cent to $1900 per tonne. 1 the demand is still booming, according to SMM, lithium iron phosphate plate has a large lithium raw material gap, frequent orders; the marginal relief of power constraints, some cathode material manufacturers have obvious increment. (2) the supply is difficult to see increment, the production of domestic salt lakes is reduced seasonally, there is almost no new supply of lithium mine recently, and the subsequent capacity release of the smelter may be restricted by the ore source; at present, the lithium salt plant can only meet the needs of old customers, the market circulation is scarce, and the contradiction between supply and demand is difficult to solve.

2) in the medium and long term, the expansion of downstream automobile enterprises is accelerated, the global automobile electrification wave continues to accelerate, the expansion intensity of upstream lithium resources is insufficient, and the end of lithium resources or one of the highest links in the industrial chain. 1 downstream car enterprises: Tesla Shanghai factory invested 1.2 billion yuan to expand production for EIA publicity, which is expected to be completed in April next year; on November 27, Beijing Economic Development District signed a "cooperation agreement" with Xiaomi, planning an annual production capacity of 300000 vehicle factories, and the first car is expected to go off the line in 2024; traditional car companies such as Mercedes-Benz, BMW and Audi have launched the latest or the first pure electric models at the Guangzhou auto show. Whether new forces or traditional car companies, in order to seize the market share of new energy vehicles, production expansion and transformation are accelerating, and the global wave of automobile electrification continues to accelerate. 2 Mid-stream battery and material factories have recently announced expansion projects one after another. This week, Penghui Energy invested 6 billion yuan to build 20GWh energy storage and power batteries, Yuntianhua invested 7.3 billion yuan to build 500,000 tons / year iron phosphate battery new materials and Fengyuan shares proposed to build 75,000 tons / year cathode material project. (3) on the contrary, the pace of production expansion at the upstream lithium resource end is relatively slow, and there are few new projects. Yabao and other leading enterprises that master large mines are relatively cautious in their decision to expand production, and it often takes more than 3 years to expand production at the end of superimposed resources. it is far slower than the construction cycle of one year to one and a half years in the middle and downstream manufacturing links, and the upstream and downstream production expansion rhythm forms a mismatch, and lithium resources may be in tight balance or shortage for a long time in the future.

Related targets: Koda Manufacturing, Shengxin Lithium Energy, Rongjie shares, Tianqi Lithium Industry, Ya Hua Group, Jiangte Motor, Ganfeng Lithium Industry, Yongxing Materials, Zang GE Holdings, Tianhua Super Clean, China Mineral Resources, Tibet Mining, Tibet City Investment, etc.

Rare earths: the rising trend is fierce under the contradiction between supply and demand, and the price of rare earths is expected to continue to rise. The price of praseodymium and neodymium oxide rose 9.3% to 85.50 million yuan per ton this week.

1) in the short term, the supply is difficult to increase, the demand improves, the contradiction between supply and demand intensifies, and the price of rare earths is expected to continue to rise. 1 supply side: the domestic supply of Q4 is limited, the import of Burmese ore has not recovered, the price of waste is high, the quantity is small, and under the condition of spot shortage, the merchants cherish the selling mood, which affects the shipment transaction. 2 demand side: new energy vehicles, wind power, energy-saving frequency conversion air conditioners and other fields continue to flourish. This week, the Ministry of Industry and Information Technology issued the Motor Energy efficiency improvement Plan (2021-2023). Rare earth permanent magnet motors are expected to become the mainstream development route of industrial motors. at present, the permeability is less than 5%, the development space is broad, and the demand for rare earths is high.

2) in the long run, rare earths are at the starting point of a new era of reshaping supply and demand, and the valuation system is reconstructed. The future of rare earths is expected to repeat the logic of the history of high demand for lithium-cobalt new energy, and its supply side is even better than lithium-cobalt, seizing the opportunity of revaluation of core assets with global pricing power. Related targets: northern rare earths, Minmetals rare earths, Baotou Steel shares, Shenghe Resources, Xiamen Tungsten Industry, etc.

Risk hints: the risk of supply exceeding expectations, the risk of demand falling short of expectations, and the risk of policy change.