SMM Lithium Industry Chain Overview

Lithium Industry Overview

"Lithium," as one of the raw materials for NEVs, is a crucial part of understanding NEVs. Today, we will introduce the lithium industry chain comprehensively from upstream to downstream through this article.

Upstream Mining

Mineral Resources

The upstream end has three types of resources containing lithium oxide that can be extracted as raw materials for lithium batteries: spodumene, lepidolite, and salt lake brine. Spodumene accounts for 45% of global supply, lepidolite 11%, and salt lake brine 39%.

By region, Australia has the most spodumene raw ore, accounting for about 92% of total spodumene resources, with the remaining split between Brazil and China (about 4% each). Lepidolite is almost exclusively found in four mining areas in Yichun, Jiangxi, China, with 48% in the Yichun Tantalum-Niobium Mine. Chile, as the world's largest salt lake resource country, holds 63% of the world's salt lakes, with China's Qinghai and Tibet regions accounting for 27%, and the rest distributed in Argentina and other countries.

Mines and Companies

Taking Australia as an example, as the world's largest spodumene resource country, its mines have the highest output, with Greenbushes, Mt Marion, Wodgina, and Pilgangoora being the main mines. Greenbushes and Pilgangoora rank first and second, respectively, with their total production in 2023 accounting for about 30% of Australia's lithium mine production. Major mining companies include CATL, Albemarle, Tianqi Lithium, Ganfeng Lithium, IGO, Posco, and Arcadium Lithium. In China, spodumene is mainly distributed in four mining areas: Yelonggou and Lijiagou in Jinchuan County, Sichuan Province; Jiajika 134 in Ganzi Prefecture; and Dahongliutan in Xinjiang Province, with Dahongliutan having the highest grade and production. Lepidolite is almost exclusively produced in four mining areas in Yichun, Jiangxi, China, with 48% in the Yichun Tantalum-Niobium Mine.

Ore Processing and Lithium Extraction

However, the composition of raw ore is complex, with uneven mineral particle sizes and various gangue minerals, leading to relatively low utilization rates of mineral resources. The overall average lithium oxide content is relatively limited (spodumene ROM contains about 1.5%~4%; lepidolite ROM even lower: about 0.3%~0.4%). Therefore, in actual production, beneficiation is needed to obtain qualified spodumene concentrate or lepidolite concentrate. The main methods are flotation and gravity separation, which separate and enrich other useful components in the ore. The lithium oxide content of the resulting spodumene concentrate can reach about 5%~6.2%, and the lepidolite concentrate can reach 1.5%~2.5%. It is evident that spodumene has a relatively high lithium oxide content, making lithium extraction from spodumene concentrate more efficient and of better quality, thus mainly producing battery-grade lithium carbonate and battery-grade lithium hydroxide. Lepidolite concentrate mainly produces quasi-battery-grade and industrial-grade lithium carbonate. Additionally, spodumene can be used to extract both lithium hydroxide and lithium carbonate, while lepidolite concentrate can only be used to extract lithium carbonate. Lithium hydroxide and lithium carbonate are both lithium chemicals and can be converted into each other; lithium hydroxide can be carbonated into lithium carbonate, and lithium carbonate can be converted into lithium hydroxide through causticization.

For salt lakes, lithium is mainly extracted by pumping underground brine and then using different processes and methods. Although each manufacturer has different lithium extraction methods, the most mainstream methods on the market are adsorption, membrane, and calcination, mainly because these methods have relatively high production and mature technology. It is worth mentioning that due to the high content of impurities such as potassium and magnesium in salt lake brine, most products cannot reach battery-grade, thus mainly producing industrial-grade lithium carbonate, but can be purified to reach battery-grade. Additionally, recycling lithium batteries is currently an important resource—lithium is extracted by grinding them into black mass.

Lithium Chemical Companies

In terms of global lithium chemical production, companies like CATL, Tianqi Lithium, Lanke Lithium, and CITIC Guoan dominate the lithium carbonate market, with the top 5 companies (CR5) accounting for 38% of the market in Q3 this year. For lithium hydroxide, companies like Tianyi Lithium, Ganfeng Lithium, and Albemarle are representative, with the top 10 companies occupying 90% of the market. Currently, more companies are involved in lithium carbonate production, mainly using spodumene as raw material. This is primarily because of the strong demand for LFP downstream, making it difficult for lithium hydroxide, which focuses on high-nickel ternary materials, to be profitable and maintain production.

Midstream Materials

The main components of batteries are cathode active materials, anode materials, electrolyte, and separator, with their cost proportions being approximately 45%, 10%, 20%, and 25%, respectively.

Cathode Active Materials

As one of the four main components of batteries, cathode active materials have the highest cost, accounting for about 45% of the total battery cost. Due to different performance requirements and products, different batteries require different cathode active materials. These can be broadly divided into ternary cathode materials, LFP materials, LCO materials, and LMO materials.

a. LFP Materials

LFP materials are mainly made from "lithium carbonate" and "iron phosphate" as the primary raw materials, along with other auxiliary materials. The main downstream products include mid-range electric vehicles, drones, and two-wheelers. The largest LFP material producers are Defang Nano and Hunan Yuneng. Currently, batteries made from LFP materials have the characteristics of high safety and cost-effectiveness, gradually occupying the market, with about 80% market share. This year, related companies had good production schedules. However, LFP materials are rarely used overseas, mainly because there is no production of iron phosphate overseas, and the European market demands ultra-long range, where LFP batteries are inferior to ternary cathode materials.

b. Ternary Cathode Materials

Ternary cathode materials are mainly made from ternary cathode precursors (nickel sulphate + cobalt sulphate + manganese sulphate) and lithium carbonate or lithium hydroxide. The mainstream product models are 523, 613, and 811, where the first number represents the proportion of nickel sulphate (battery capacity), the second number represents the proportion of cobalt sulphate (battery safety), and the third number represents the proportion of manganese sulphate (battery stability). Low-nickel or mid-nickel products require lithium carbonate, while high-nickel products can only use lithium hydroxide. Currently, mainstream material manufacturers are developing towards high-nickel or mid-nickel high-voltage trends. High-nickel ternary cathode materials are represented by companies like Ronbay Technology and B&M, occupying about 37% of the ternary cathode materials market. Mid-nickel ternary cathode materials are represented by companies like Reshine Technology and XTC New Energy Materials (Xiamen), occupying 24% (5-series) and 32% (6-series) of the market. In the Chinese market, ternary cathode materials are gradually being squeezed out by LFP. As of September this year, the proportion of LFP to ternary cathode materials was 8:2. However, in the overseas market, ternary cathode materials occupy the main market share (over 90%).

Anode Materials

Anode materials are an important raw material for lithium-ion batteries, playing a key role in lithium-ion batteries. During charging, anode materials continuously react with lithium ions, "capturing and storing" lithium ions. During battery discharge, lithium ions transfer from the anode to the cathode, and the battery does work externally. Therefore, the reversible reaction capability of lithium ions with anode materials determines the energy storage effect of lithium-ion batteries. Improving lithium-ion battery performance depends to some extent on improving anode material performance.

The main raw material for anode materials is artificial graphite, accounting for about 10% of the cost. China is the main producer of anode materials, accounting for over 90% of the global share, with companies like BTR, Putailai, and Shanshan Corporation occupying about 40% of the market. However, there is a trend towards using metallic lithium in the future.

Downstream End-Use

Downstream products mainly include large power (NEVs), small power (two-wheelers, drones), 3C digital products, and energy storage.

Large power has the largest application proportion in the lithium battery field, about 70%. Among them, LFP materials and mid-nickel ternary cathode materials correspond to mid- and low-end NEVs, while high-nickel ternary cathode materials are used for high-end brand products. Downstream end-use companies include BYD and CATL. Small power accounts for about 12% in the lithium battery field, 3C digital products about 8%, and energy storage about 10%, with the best market demand and performance, contributing significantly to the downstream end-use market, with many exports overseas.