[agency Review] Lithium resource hard shortage Lithium concentrate auction price hit a new high

Event: on September 14, Pilbara held its second lithium concentrate auction on its BMX platform. The lithium concentrate grade was 5.2%, the moisture content was not more than 10%, the quantity was 8000dmt (+ /-10% determined by the seller), and the shipping date was from November 10 to November 30, 2021. The final transaction price was US $2240 / ton (FOB), a jump of 79.2% from the last auction price (US $1250 / ton), which exceeded market expectations.

The price of lithium concentrate hit another record high, which may push the price of lithium carbonate up to more than 200,000 yuan / ton. The auction price of lithium concentrate is $2240 / tonne (FOB,5.5% grade), plus freight costs of $80 / tonne (about $20-25 / tonne at normal levels), or about $2524 / tonne for lithium concentrate (CIF,6.0% grade), the price of lithium concentrate is well above the high point of the 17-18 year cycle ($965 / tonne). Corresponding to the cost of lithium carbonate ore about 150,000 yuan / ton LCE, processing cost 1.5-200,000 yuan / ton, push up the production cost of lithium carbonate to about 170,000 yuan / ton LCE, or push up the price of lithium carbonate to more than 200,000 yuan / ton (Wuxi electronic disk lithium carbonate 2110 contract price reaches 179,000 yuan / ton).

The pricing mechanism of lithium concentrate is gradually interpreted in the direction of marketization. At present, according to industry practice, the pricing mechanism of lithium concentrate is linked to the price of lithium carbonate, and the profit is more inclined to lithium salt plants. Pilbara auctions through the BMX platform (the future Altura lithium concentrate will also be auctioned on this platform) in the future or reshape the pricing mechanism of lithium concentrate, spodumene pricing may be more market-oriented, enterprises with a higher degree of integration will benefit more.

The price of lithium concentrate far exceeds the high point of the 17-year cycle, and the lack of capital expenditure of lithium resources enterprises is the deep-seated reason why the price of lithium concentrate has reached a new high. 1) at present, there is a hard shortage of lithium concentrate: the number of mines in Australia has been reduced from 7 to 4, Talison only supplies Tianqi and Yabao (limited OEM is expected), Marion only supplies Ganfeng Lithium, Galaxy and Pilbara have also signed long-term agreements with Ganfeng Lithium, Yahua Lithium, Zhiyuan Lithium, Tianyi Lithium and other enterprises, which can sell a limited number of products to the outside world. 2) insufficient capital expenditure for spodumene mine expansion: the second phase of Talison release mainly depends on the commissioning of Quinana and Kemerton lithium hydroxide plants, Yabao continues to store Wodgina due to lack of lithium salt plants, SQM's Holland mine is expected to be completed and put into operation in 24 years, and the foreseeable completion schedule of African mines is 23 years later. The certainty increment in 22 years is only the resumption of production of Altura and the technical transformation of Pilbara (an increase of 30,000 to 50,000 tons of lithium concentrate), Lijiagou and Core are all expected to be completed in 22 years H2.3) the possibility of salt lake resources expansion is higher than expected: although South American salt lake resources have larger capacity expansion plans, the progress of production expansion is usually lower than expected due to the influence of epidemic situation, political situation, strikes and other factors. The community near Atacama Salt Lake has asked local authorities to suspend SQM's license for lithium mining in Atacama Salt Lake or significantly reduce the scale of its operation until SQM can submit an acceptable environmental compliance plan.