[SMM Analysis] Global Lithium Mine stocks increased slightly in the first quarter and Lithium Salt production rate may begin to decline

SMM, 14 May:

According to SMM calculation, the global lithium ore inventory (LCE) increased by 1578 tons in the first quarter of 2020, including 3343 tons of domestic inventory (LCE) and 1765 tons of overseas lithium concentrate storage (LCE).

(note: the ore stock calculated in this model does not include salt lake brine and lithium mica ore. )

In the first quarter of 2020, due to the impact of the epidemic on demand, lithium carbonate prices quickly fell back after a small increase, transmitted to the upstream lithium concentrate prices under synchronous pressure. The average import price of lithium concentrate used to produce lithium salt in March 2020 was $439.8 per tonne, down 22.4 per cent from December 2019, according to customs data.

With the lithium concentrate price falling below $450 / ton, and constantly approaching the CIF price of $400 / ton, overseas mine costs and cash flow under pressure, further adjust the operating rate in the first quarter, compared with the fourth quarter of 2019, overseas lithium concentrate production fell 13% month-on-month in the first quarter of 2020 compared with the fourth quarter of 2019. Except for the stable underwriting relationship between Talison and Marion, the output of lithium concentrate in other mines decreased by 45.7% month-on-month, with obvious de-inventory effect.

China's lithium ore stocks increased slightly in the first quarter of 2020, mainly due to the impact of the epidemic, the smelter delayed the resumption of work after the Spring Festival, the total lithium salt production in the first quarter decreased by 25.1% compared with the fourth quarter of 2019, and the digestion rate of lithium ore slowed down.

From the side of the mine, the historical inventory of overseas lithium ore is relatively large, from 2017 to the first quarter of 2020, the (LCE) of overseas lithium concentrate is more than 40, 000 tons, the stock of overseas lithium raw ore is close to 30, 000 tons, and the side of lithium mine is still in the cycle of active inventory removal. At the same time, due to the spread of the global epidemic and the rapid weakening of demand, the price of lithium carbonate has fallen to the bottom of the cycle, the de-inventory rhythm of lithium mines will be further accelerated, and the inventory pressure will gradually transfer to the smelting end.

According to SMM data, China's lithium carbonate inventory level has increased rapidly since the second half of 2019. From 2018 to April 2020, China's cumulative inventory of lithium carbonate has exceeded 60,000 tons (the inventory data includes lithium carbonate causticized into lithium hydroxide).

SMM believes that based on the current cash cost of overseas mines, it is difficult for the short-term lithium concentrate price to fall below US $400 / ton, and the battery-grade lithium carbonate price has a certain cost support. At the same time, in the case that the demand side can not support the price correction, considering the current high inventory of ore and lithium salt products and the lack of willingness of smelters to purchase raw materials, the lithium salt supply side will be forced to take the lead. As some lithium salt companies began to cut operating rates or stop shipments in May, it is expected that the price of battery-grade lithium carbonate will gradually stop falling and stabilize in the price range of 4-42000 yuan / ton.