Lithium prices approach 70,000 yuan/mt! In October, global giants scramble for mines against the trend!

On October 24, the Lithium Branch of the China Nonferrous Metals Industry Association released the operational status of the lithium industry for September 2024.

Lithium prices continue to decline

Data shows that in September 2024, the lithium industry continued to reduce production due to price impacts, with some production lines in Jiangxi shutting down. Lithium prices remained low, still below 80,000 yuan/mt, and most companies reduced their production. On the demand side, battery and NEV production maintained a growth trend, with NEV sales increasing slightly.

In September 2024, domestic lithium carbonate prices remained below 80,000 yuan/mt. On September 30, the price of industrial-grade lithium carbonate was 72,500 yuan/mt, up 1.4% MoM, but down 53.4% YoY; the price of battery-grade lithium carbonate was 75,500 yuan/mt, up 0.7% MoM, but down 55.0% YoY.

At the end of September, the spread between lithium carbonate futures and spot prices was roughly the same as the previous month. On September 27, the closing price of the most-traded lithium carbonate contract on the Guangzhou Futures Exchange was 78,600 yuan/mt, down 0.5% MoM, and down 47.6% YoY. The MoM decline in futures was smaller than that of spot prices, with the month-end spread at 6,050 yuan/mt.

Regarding the latest market quotes, according to SMM data, on October 24, the price of battery-grade lithium carbonate was 71,650-74,950 yuan/mt, with an average price of 73,300 yuan/mt, down 350 yuan/mt from the previous day.

In the futures market, on October 24, the most-traded lithium carbonate contract 2501 opened at 75,600 yuan/mt and closed at 74,200 yuan/mt, with the closing price down 0.4% from the previous day's settlement price.

Southwest Futures analysis indicates that the peak season drive may weaken in October, with finished product inventories of cathode active materials continuing to increase. The production schedule for cathode active materials in November shows a significant decline, and the short-term inventory trend remains destocking. However, as the fourth quarter gradually enters the off-season, the pressure of lithium carbonate oversupply increases again. Coupled with the imminent concentrated cancellation of warehouse warrants and their significant growth, there is considerable resistance to price increases, and short-term prices are expected to fluctuate downward.

SMM believes that upstream lithium chemical smelters still maintain a strong sentiment to stand firm on quotes: downstream material plants currently have no plans to stockpile for November and are adopting a cautious wait-and-see attitude. Although downstream demand in October remains relatively optimistic, due to the current level of lithium carbonate inventory, downstream material plants are not eager to stockpile, and spot prices of lithium carbonate are expected to continue to decline in the near term.

On October 24, Zijin Mining disclosed in its latest investor relations activity record that the oversupply situation in the lithium industry has not significantly reversed, and the downward trend in lithium prices will continue in the short term. The rapid decline in prices will help achieve a quicker rebalancing of supply and demand. In the medium and long term, the demand space for the global NEV and energy storage industries remains large, with global lithium carbonate demand expected to exceed 3 million mt by 2030. As the current cycle of inventory and capacity exit the market, a relatively reasonable lithium price will be needed in the future to stimulate lithium supply to meet the growing demand.

Huge investments in the scramble for mines

Despite the general market expectation of low lithium prices, the global scramble for lithium resources is intensifying. Since October, several global listed companies have made significant investments to acquire mines.

On October 9, local time, global mining giant Rio Tinto announced that it had reached a transaction agreement with US-based Arcadia Lithium, acquiring Arcadia in an all-cash transaction valued at approximately $6.7 billion.

Rio Tinto stated that it would acquire Arcadia at $5.85 per share, a 90% premium over Arcadia's closing price of $3.08 per share on October 4.

Through this acquisition, Rio Tinto will gain lithium mines in Argentina and Australia, as well as customers including Tesla, BMW, and General Motors.

A research report by CITIC Securities pointed out that Rio Tinto has strong financial strength and cross-border operational experience, and the merger is expected to generate certain synergies. This premium acquisition demonstrates overseas mining companies' optimistic attitude towards lithium prices, which will bring more confidence to the market. The consolidation of lithium assets will also increase industry concentration, limiting the downside space for lithium prices. Recently, lithium prices have risen moderately, and market sentiment has improved, leading to a rebound in the undervalued lithium sector.

According to foreign media reports, on October 16, local time, General Motors announced that it would form a joint venture with Canadian lithium mining company Lithium Americas to develop the Thacker Pass mine in Nevada, USA.

Specifically, General Motors will invest $625 million (approximately 4.45 billion yuan) in Lithium Americas, including $430 million (approximately 3.06 billion yuan) in cash and $195 million (approximately 1.39 billion yuan) in credit loans, to hold a 38% stake in the Thacker Pass project, while Lithium Americas will hold the remaining 62%.

On October 22, the public bidding process for the exploration and mining rights of the Maijitan lithium mine in Ganzi Prefecture, Sichuan Province, officially started. According to the disclosure, the bidding announcement period is from October 23 to November 19, and the net assets of bidding companies must not be less than 300 million yuan.

The announcement shows that the exploration and mining rights of the Maijitan lithium mine, organized by the Ministry of Natural Resources and implemented by the Sichuan Provincial Department of Natural Resources, are being offered for the first time for a period of five years, with lithium as the exploration mineral.

Reports indicate that the Maijitan lithium mine is the highly anticipated "Jiajika New No. 3 Vein (X03)" located at the junction of Kangding City and Yajiang County in Ganzi Prefecture, Sichuan Province. It covers an area of over 20 square kilometers, has a large scale and high grade, and is suitable for open-pit mining. Preliminary survey results show that its lithium oxide resources amount to 885,500 mt, with an average grade of 1.5%.

Insiders reveal that the Maijitan lithium mine is a super-large lithium vein discovered in China in recent years, with many potential buyers, including CATL, Tianqi Lithium, and Chengxin Lithium, all eyeing it for a long time, indicating fierce competition.

Overall, the lithium carbonate market is still in a destocking phase, lacking upward momentum in prices. However, supported by costs, there is also no room for significant price reductions. As a core material for lithium batteries, lithium is an important strategic resource, and the global scramble for mines will continue.