Lithium carbonate price rose more than 6%! Another lithium mining company announces production cuts. Can the balance of the lithium market improve as production capacity is cleared?

SMM News on February 28: Since February 21, lithium carbonate futures price has been stimulated by rumors such as "Yichun area has reappeared environmental protection issues or restricted the start of operations of companies that cannot properly handle lithium slag", driving lithium carbonate futures price to hit the daily limit. After that, lithium carbonate futures price swept away the previous decline and started a rebound. As of February 28, lithium carbonate has recorded six consecutive gains. On February 28, the main price of lithium carbonate rose by more than 6%, once again breaking through the 11,000 yuan/ton mark. However, in the end, the price of lithium carbonate futures price did not stabilize at 11,000 yuan/ton. As of the close of the day, the main price of lithium carbonate was reported at 10,800 yuan/ton with an increase of 3.45%.

As we all know, lithium prices fell significantly in 2023. Domestic lithium prices dropped from 512,000 yuan/ton at the end of 2022 to 96,900 yuan/ton at the end of 2023, an annual decline of as high as 81.07%. On the mining side, the spodumene concentrate (CIF China) index also dropped from US$5,505/ton at the end of 2022 to US$1,315/ton at the end of 2023, a drop of 76.11%.

The decline in overseas lithium prices is also clearly reflected in the sales price of mine lithium concentrates. Taking the Pilbara, known as the "lithium price bell", as an example, the single ton sales price of its SC5.3% grade spodumene will start from 2023. The price in the first quarter dropped from US$4,840/ton to US$1,113/ton in the fourth quarter of 2023, a decrease of 77%.

After the continuous sharp decline in lithium carbonate prices in 2023, it has gradually approached the main cost range of Australian mines. Among the eight Australian mines, the two with higher costs have begun to respond.

Regarding the impact of the news about overseas mines reducing production and suspending operations that have been reported in the market, SMM believes that the significant impact in the short term is that this situation sends a "bottoming" message to the market and boosts market sentiment; in the medium and long term, it is expected that the above-mentioned production reduction and suspension projects may not have a major impact on the overall lithium salt supply. The main reason is that the smooth start-up and ramp-up of lithium extraction projects in South American regions such as Argentina's salt lakes will quickly make up for the reduction in this part of the mines. Take Arcadium Lithium, a lithium producer that announced last week that it has lowered its production forecast for 2024. Although it has lowered its production forecast for the Mt Cattlin mine, its lithium supply for the whole of 2024 will remain the same due to the expected volume of its own salt lake project. showing growth trend.

Looking forward to 2024, SMM believes that although the competition in the domestic lithium salt market is currently fierce, considering that most of the production capacity of domestic lithium salt plants has been newly built in recent years, it is difficult to clear the situation quickly and completely in the short term. It is expected that subsequent lithium salt plants may maintain at a low operating rate despite the sluggish market conditions.

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