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Commencement of a Fresh Wave of Lithium Carbonate Production Expansion Set to Expedite Industry Reshuffling

published: 2023-08-25 17:13

Recognized as “white oil,” lithium has attained the status of a strategic mineral resource in numerous major economies globally. Concurrently, lithium carbonate stands out as the most extensively utilized lithium derivative. This article delves into an examination of lithium carbonate’s pricing, production capacity, and the accomplishments of lithium salt manufacturers. By doing so, readers can gain a more profound comprehension of the evolutionary trajectory and prevailing patterns within the lithium carbonate market.

Over the past decade, the price of lithium carbonate has experienced a rollercoaster ride, witnessing fluctuations and shifts in various directions.

In this span of ten years, the lithium carbonate market has undergone a remarkable revolution. It has transitioned from serving as a relatively stable raw material for conventional industries to emerging as a pivotal component within the realm of new energy. As market dynamics shifted, the price of lithium carbonate also embarked on a journey of highs and lows.

The Era of Stability (Pre-2015): Up until 2015, lithium carbonate primarily found its application in the glass and ceramics sectors. Here, its role centered on acting as a melting agent, effectively lowering the melting points of glass and ceramics. This, in turn, curtailed energy consumption during the production process. During this phase, the demand for lithium carbonate exhibited a consistent pattern, resulting in a price that lingered at a relatively modest level, hovering around 30,000 to 40,000 yuan per ton.

The Dawn of New Energy Vehicles (Post-2015): Post-2015 marked the rapid proliferation of new energy vehicles, with the spotlight firmly on lithium-ion batteries. This surge in demand for lithium carbonate propelled its price to unprecedented heights. In 2016, the price soared to a staggering 180,000 yuan per ton.

Expansion of Capacities and Balancing Supply and Demand (2018-2020): To cater to the burgeoning needs of the new energy vehicle market, manufacturers undertook extensive expansions in lithium carbonate production capacities. This surge in supply led to a recalibration of the supply-demand equilibrium, consequently causing the price of lithium carbonate to decline. By 2020, the price had declined to approximately 30,000 yuan per ton, marking a substantial decline from its earlier peaks.

Dawn of Futures Market (2023): A notable milestone occurred on July 21 of this year, when trading in lithium carbonate futures commenced on the Guangzhou Futures Exchange. This introduction of lithium carbonate futures has ushered in heightened transparency and stability within the market. As a strategic tool, these futures empower enterprises and investors to adeptly navigate price risks and mitigate the reverberations of market volatility on businesses.

Domestic Price Trend of Battery-grade Lithium Carbonate Since 2021

Lithium Carbonate Emerges as a Lucrative Venture and Its Production Capacity will be Excessive

The narrative of lithium carbonate’s price fluctuations is intricately woven with the substantial growth in production capacity across enterprises. The surge in demand for lithium carbonate, driven by the flourishing new energy sector and the global drive towards carbon neutrality, has thrust it into the spotlight, attracting the keen interest of numerous investors. In a race to capture market share, prominent manufacturers have intensified their efforts in relentlessly pursuing the development of lithium carbonate projects.

Charting the Global Footprint of Lithium Enterprises

Analyzing the landscape of lithium carbonate expansion projects as depicted above, a noteworthy trend comes to light:

Proliferation in Project Numbers: Over the past couple of years, a surge of companies like Lopal Technology, Zhicun Lithium, and Yongxing Special has launched an array of lithium carbonate expansion endeavors. This robust surge signifies the robust appetite within the market for lithium carbonate and reflects the optimistic outlook for the future evolution of the new energy industry.

Significant Investment Ventures: The financial commitment behind numerous projects has reached staggering figures, tallying up to hundreds of millions or even billions yuan. In fact, some of the more substantial undertakings have been marked by investments surpassing 10 billion yuan. An illustrative example includes heavyweights like People Holding Group, Xinjiang Nonferrous Metal, Zhi Cun Lithium, Guocheng Holding, Sunwoda, Anzhong Shares, and Dazhong Mining, all of which have channeled investments exceeding 10 billion yuan into their lithium carbonate endeavors.

Influx of Diverse Enterprises: The data highlight a noteworthy observation – participation in the lithium carbonate domain extends beyond specialized producers. The landscape features a host of cross-industry conglomerates and entities related to the new energy sector, contributing resources and investments toward lithium carbonate production. Notably, domestic giants like Anzhong, renowned for vibrating screens, and expansive integrated mining enterprise Dazhong Mining, have entered this arena.

Geographical Spread: Expansion initiatives span the nation, with focal points notably situated in Jiangxi, Xinjiang, and Argentina. These regions have emerged as veritable hubs due to their robust lithium carbonate resources or production capabilities. Yichun, Jiangxi Province, propelled by abundant lithium mica resources, has lured enterprises such as Jiangte Motor and Anzhong for investment. This city has subsequently blossomed into a pivotal domestic hub for lithium mica extraction, poised to ascend to the status of “Asia’s Lithium Capital.”

Collaboration and Synergy: Certain companies have chosen to join forces with others to amplify their production capabilities, exemplified by projects like the collaborative endeavor undertaken by CATL. This trend is indicative of the industry’s proactive pursuit of resource amalgamation and cooperative efforts, aimed at achieving heightened efficiency and scaling up production.

Technological Innovation and Environmental Consciousness: In various project descriptions, terms such as “battery-grade” or “high-purity” have surfaced, underscoring the technological strides being made in lithium carbonate production and manufacturers’ dedication to elevated product quality. Furthermore, the launch of some projects has been accompanied by public announcements regarding environmental assessments, underscoring a strong commitment to ecological preservation.

In the span of a mere two years, the lithium carbonate industry has undergone a robust phase of investment and expansion. A multitude of projects have either commenced production or are nearing completion, witnessing an escalation in production capacity from thousands of tons to tens of thousands of tons. This trajectory implies that in the foreseeable future, as more projects come online, the supply of lithium carbonate is poised for continuous expansion. This, in turn, could heighten competitive pressures within the market.

It’s imperative to underscore that the augmentation in lithium carbonate production capacity bears implications not only on direct market pricing but also on the overarching structure, partnerships, and technological advancements within the entire lithium carbonate industry.

Firstly, Capacity Expansion Triggers Market Restructuring. The burgeoning expansion of capacity acts as a catalyst for the reshaping of the market landscape. As prices diminish, smaller enterprises burdened by higher production costs might encounter challenges in sustaining operations, potentially leading to their exit from the market. This phase of attrition serves to streamline production capacity, channeling the lithium carbonate market’s evolution from numerous small players towards a select few larger enterprises. This transformation, in turn, fosters improved operational efficiency across the market, thereby curbing production costs.

Secondly, Capacity Expansion Unveils a Novel Landscape of Collaboration and Competition. In their bid to secure a stable raw material supply, sizable new energy vehicle manufacturers are forging tighter collaborations with lithium carbonate producers. Notably, some have even ventured into the realm of lithium carbonate production. This depth of vertical integration bolsters raw material stability and reduces production costs, albeit potentially intensifying market rivalry.

Lastly, concurrent with the surge in production capacity, the realm of lithium carbonate production technology is undergoing refinement. Amidst the pursuit of scale-driven benefits, enterprises are concurrently striving to enhance production efficiency and curtail manufacturing expenses. This dual-pronged approach not only alleviates the pressures arising from declining prices but also ushers in an era of augmented technological innovation and expanded application scenarios for lithium carbonate.

Ups and Downs in Lithium Salt Manufacturers Performance: Navigating Challenges and Opportunities in the Industry

Amidst the ebbs and flows of lithium carbonate prices during 2022-2023, the performance trajectory of lithium salt companies also mirrored a rollercoaster ride. In the initial quarter of this year, the net profits attributed to parent company shareholders for Ganfeng Lithium, Salt Lake, Shengxin Lithium, Rongjie Shares, Jiangte Electric, Tibet Mining, and other lithium salt enterprises experienced varying degrees of decline due to the plummeting lithium carbonate prices.

As the year progressed, the first half year witnessed Qinghai Salt Lake Potash Co., Ltd., Yahua Group, Canmax, Chengxin Lithium, Younergy, Tibet Urban Development and Investment, Tibet Summit, and Tibet Mineral Development grappling with performance pressures. Meanwhile, Jiangte Motor and Machinery, as well as ST Jinyuan, found themselves at the precipice of potential losses. The decline in performance has been attributed by these lithium mining companies to shifts in supply and demand within the lithium carbonate market, coupled with a pronounced plummet in lithium salt prices, and a continued surge in the costs of lithium raw materials. The cascading effect of these factors is a notable reduction in profits generated from lithium salt products, which in turn has cast a shadow on their annual performance. Despite the relative stability observed in the current domestic lithium carbonate price, its implications continue to resonate deeply within the realm of relevant enterprises.

However, when taking a broader view, the future for the lithium carbonate industry is still optimistic. The demand for lithium carbonate remains robust, galvanized by the sustainable expansion of new energy vehicles and energy storage technologies. As corroborated by TrendForce, the aggregate sales of new energy vehicles during the first half of 2023 amounted to a staggering 5,462,000 units, showcasing an impressive annual surge of 33.6%. This statistic serves as a resounding testament to the positive trajectory of the lithium carbonate industry’s growth.

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