How will the Sichuan Lithium Mine act as the Average Price of Spodumene Concentrate Rose to Nearly $5,000/mt

SHANGHAI, June 28 (SMM) - Since June, there were many incidents in domestic and foreign lithium mining. Ion terms of domestic, Qinghai, Sichuan and other places lithium mines have rich lithium resources. Zhai Gang, director of the Sichuan Provincial Department of Economy and Information Technology, mentioned that Sichuan has rich reserves of lithium ore resources, accounting for 57% of the national total resources, and currently has mining rights of 158 million mt ore reserves. 

According to SMM, at present, the overall development of lithium mines in Sichuan is relatively low. The main production maily comes from the Mika and Yelonggou lithium mines under Rongjie and Shengxin Lithium Energy. In addition, the spodumene mine in Lijiagou is expected to be put into production this year. Among them, the Mika spodumene mining area has a mining capacity of 1.05 million mt/year, a beneficiation capacity of 450,000 mt/year, and the lithium concentrate output is about 70,000-80,000 mt/year amid the full production. Lijiagou Spodumene Mine has proven ore reserves of 38.812 million mt with an average grade of 1.3% and lithium oxide reserves of 502,200 mt, accompanied by tantalum, niobium, beryllium, tin and other rare metals. There are 15 ore bodies in the mining area, among which the main ore body No. I is the largest single spodumene mine in Asia that has been proven and obtained the mining right certificate. 

Therefore, in general, it is imperative to accelerate the availability of lithium resources in Sichuan. Zhai Gang, director of the Sichuan Provincial Department of Economy and Information Technology, said that Sichuan will strive to form 5 million mt of lithium mining capacity, basic lithium salt capacity of 600,000 mt, anode and cathode materials capacity of 2.5 million mt, power battery capacity of 350GWh, and to promote 800,000 new energy vehicles during the "14th Five-Year Plan" period.

It is worth mentioning that in May 21 this year, a prospecting rights auction of a Sichuan lithium mine can be described as a hot topic in the whole industry, which took 6 days and 5 nights. The auction of 54.2857% equity of Sinuowei Mining in Yajiang, Sichuan finished with 2 billion yuan from the initial starting price of 3.3529 million yuan. It is reported that the auction went through 3,448 bids and attracted 980,000 onlookers, which shows its popularity.

According to public information, the Dechelongba lithium mine is located in the north-east of Yajiang County, Ganzi Prefecture, Sichuan Province. It belongs to the Mika spodumene mining area. The mine reserves are 18.14 million mt, with an average grade of 1.34%, which is a super-large-scale lithium mine.

SMM believes that the reason why this auction was able to achieve such a high price is that, on the one hand, the efforts of enterprises to ensure the supply of resources have gradually increased amid the consensus on the shortage of resources. On the other hand, the intervention of capital can also accelerate the mining of lithium ore.

And although the chief scientist of CALT, Wu Kai said that from a global perspective, lithium ore supply is sufficient and the price increase was mainly speculative. But he also mentioned at the same time that the rapid rise in the price of lithium carbonate is very detrimental to the industry. In order to change the status, on the one hand, we should notice that the current lithium ore mainly relies on imports, hence the speculation will lead to sudden price increases. Therefore, we need to increase the self-supply capacity of lithium ore and expand the amount of mining. On the other hand, we have to put recycling in place.

And on June 27, the Deputy Director of the Ministry of Industry and Equipment Industry, Guo Shougang, also said that lithium resources are still running at a high level. At the same time, the prices of cobalt, nickel, petroleum coke for graphite anode and other raw materials are also increasing significantly, putting a lot of pressure on the production and operation of the enterprise. In the next step, the Ministry of Industry will guarantee the power battery resources and materials in the following three aspects. First, guiding upstream and downstream enterprises to strengthen the connection between supply and demand, establishing stable cooperative relations through signing long-term agreements, and cooperating to cope with resource supply and price fluctuation risks. Second, accelerating the development and utilization of domestic resources, guiding local competent departments to ensure the production factors of relevant enterprises, continuously improving the supply of domestic resources, and supporting leading enterprises to jointly develop overseas resources in accordance with international rules. Third, promoting the comprehensive utilization of renewable resources, studying and formulating standards for lithium and other renewable raw materials, improving the power battery recycling system, and promoting the recycling of more recyclable resources.

According to SMM spot price, spodumene concentrate (6%, CIF China) spot quotations have increased all the way since the beginning of 2022. the average spot price rose from the $2,150/mt at the beginning to $4,970/mt on Jun 28, close to $5,000/mt.

And as one of the main raw materials for power batteries, battery-grade lithium carbonate prices increased significantly, and the average spot price was still at a high level.  According to SMM historical prices, battery-grade lithium carbonate prices once rose from 278,000 yuan/mt at the beginning of the year to 503,000 yuan/mt in the mid and late-March. But the prices declined slowly to 461,500 yuan/mt amid the control of Ministry of Industry, warm temperature, output increase in Qinghai and other places, the improved downstream demand and eased pandemic.

And since May 27, with the improvement of the pandemic in Jiangsu and Zhejiang, downstream demand increased. In addition, lithium carbonate spot quotations slowly rose, and as of June 28, the average spot price of battery-grade lithium carbonate was quoted at 469,000 yuan/mt amid the positive sentiment and cost support as the auctions of Pilbara and the 54.2857% equity of Sinuowei Mining in Yajiang, Sichuan finished.

From the recent market performance, SMM research shows that the production of upstream manufacturers was stable and the supply was sufficient, hence the recent transactions increased. The downstream terminal recovered only slightly and mainly purchased on rigid demand. The major car companies suspended the production for two weeks to optimize the production line, hence the lithium iron demand increase was less than expected. The overall prices increased slightly. It is expected that the inventory decline of LFP plants will finish soon, and manufacturers began to consider a new round of procurement. It is expected that the recent procurement will increase significantly as the lithium carbonate prices will continue to increase.

In addition, on June 23, the Australian lithium miner announced the early completion of its sixth auction, with a price of $6,350/mt. After proportional adjustment of lithium content and freight, the quotation was about $7,017/mt (SC6.0 CIF China). It is reported that this auction has 5,000 dmt of ore with the grade of 5.5%. After conversion, the cost price of 1 mt LCE is about 449,000 yuan/mt, exceeding 400,000 yuan/mt. According to Pilbara, this batch of ore is expected to be shipped in late-July. According to SMM, considering the logistics cycle, this batch of spodumene concentrate is expected to enter the market from September to October.

Pilbara CEO Dale Henderson commented that the results further indicate that the current global demand for battery raw materials in the lithium supply chain remains very strong and the outlook for the lithium industry is expected to remain positive. And Cinda Securities also commented that the auction price breaking a record high indicates that lithium resources are still in short supply.

In addition, the world's largest lithium miner announced on Monday, USA Eastern Standard Time, that it plans to increase the company's lithium production to about five times by 2030 to 500,000 mt/year. In addition, Albemarle also expects that global lithium demand will reach 3.2 million mt/year by 2030. Albemarle said the company will build a lithium processing plant with 100,000 mt/year in the United States, equalling to the current total output of the company. It is reported that the lithium supply will come from Albemarle's Kings Mountain mine in North Carolina, which is currently under closure and could be reopened from 2027 at the earliest.