A bearish news suddenly came from the super track.
According to Bloomberg on the 29th, four new lithium mining projects in Argentina will be put into operation in the coming weeks to months, which will significantly increase Argentina's annual lithium production capacity by 79%, reaching 202000 metric tons equivalent. Argentina is a world leader in lithium reserves, with nearly 19 million tons of proven lithium reserves, accounting for approximately 21% of the total global reserves.
For the global lithium market, Argentina's large-scale expansion of production coincides with an uncertain global demand outlook, with lithium inventories piling up and prices continuing to decline. On June 27th, the Lithium Industry Branch of China Nonferrous Metals Industry Association issued a document stating that on May 31st, the price of battery grade lithium carbonate was 105500 yuan/ton, a month on month decrease of 4.52% and a significant year-on-year decrease of 64.54%. Due to oversupply and slowing demand, the price of lithium carbonate plummeted by over 80% in 2023.
Analysts believe that the core reason for the significant decline in lithium carbonate prices is the loose supply and demand fundamentals. Although the maintenance of large factories has reduced supply, it still cannot shake the current pattern of oversupply. Looking ahead to the future, there may still be downward space for lithium carbonate prices. From the perspective of inventory and supply and demand, the overall inventory of the lithium carbonate market has increased. Although there is replenishment in the downstream after the price decline, imports have increased, and the current situation of strong supply and weak demand is still weak.
A bearish raid
Against the backdrop of a continuous sharp drop in prices, a bearish news suddenly came from the lithium carbonate track.
According to Bloomberg on June 29th, four new lithium mining projects in Argentina will be put into operation in the coming weeks to months.
After four lithium mining projects are put into operation, Argentina's lithium production capacity will almost double, with an annual capacity increase of 79%, reaching 202000 metric tons equivalent. This will further consolidate its position as a major global lithium producer.
Multiple Chinese miners will be responsible for the development of the aforementioned new lithium mines. Among them, Centenario Ratones, jointly participated by China's Qingshan Holdings and French miner Eramet SA, will hold a production ceremony next week. The other three projects are Tres Quebradas from Zijin Mining, Mariana from Ganfeng Lithium, and Sal de Oro from South Korean steel giant Pohang Holdings.
It is worth noting that the new Argentine President Javier Mile is accelerating the development of lithium resources and promoting lithium exports to boost the economy.
These are located in South America; quot; Lithium Triangle; quot; The new project on the salt lakes of the Andes Mountains in the region is a key project for Argentina to exchange for foreign exchange. Argentina urgently needs to increase export revenue in exchange for the US dollar to boost the economy.
The "Lithium Triangle" region has nearly 60% of the world's lithium resources. According to estimates from the United States Geological Survey, the total amount of lithium discovered worldwide is 86 million tons, including 21 million tons in Bolivia, 19.3 million tons in Argentina, and 9.6 million tons in Chile.
Argentina is a world leader in lithium reserves, with proven lithium reserves accounting for approximately 21% of the total global reserves. Most of Argentina's lithium mines are low-cost salt lake brine type lithium mines. Some analysts believe that if Argentina's economy stabilizes in the future, it may become one of the world's newly added largest lithium mining areas.
At the same time, Rio Tinto Group also plans to build a mine with an annual output of 3000 tons in Salta Province, Argentina by the end of this year.
Industry chain insiders believe that although new production increases may not be immediately put into use, the certainty of future supply increases may further put pressure on lithium prices to decline. According to calculations, global lithium production will reach 1.4 million tons this year.
For the global lithium market, Argentina's large-scale expansion of production coincides with an uncertain global demand outlook, with lithium inventories piling up and prices continuing to decline. This means that the price of lithium may worsen.
A sharp drop in prices
The latest article from the Lithium Industry Branch of the China Nonferrous Metals Industry Association stated that the price of battery grade lithium carbonate has been declining for three consecutive months. On May 31st, the price of battery grade lithium carbonate was 105500 yuan/ton, a month on month decrease of 4.52% and a significant year-on-year decrease of 64.54%. Due to oversupply and slowing demand, the price of lithium carbonate has plummeted by over 80% in 2023.
Since June, the downward trend in lithium carbonate prices has continued. According to the latest data released by Shanghai Steel Union, the average price of battery grade lithium carbonate is 90000 yuan/ton; The average price of industrial grade lithium carbonate is 87000 yuan/ton; The average price of battery grade lithium hydroxide (coarse particles) is 83000 yuan/ton.
In the futures market, the price of lithium carbonate futures continued to decline, dropping to a low of 86000 yuan/ton on Tuesday, approaching the lowest price since its listing. As of the close on June 28th, the main contract was priced at 94600 yuan/ton, with a cumulative decline of 12.8% in June.
Baichuan Yingfu analyzed that overall, the situation of increasing supply and decreasing demand in the lithium carbonate market is difficult to reverse in the short term. Although some lithium salt plants plan to undergo maintenance or reduce production, the supply of lithium carbonate is still sufficient, and downstream demand is weak and difficult to improve in the short term. It is expected that the price of lithium carbonate will fluctuate between 85000 yuan/ton and 92000 yuan/ton.
Wu Jiang, an analyst at Guotou Anxin Futures, believes that there is still room for a downward trend in the price of lithium carbonate. From the perspective of inventory and supply and demand, the overall inventory in the lithium carbonate market has increased. Although downstream restocking has occurred after the price decline, imports have increased, and the current situation of strong supply and weak demand remains. Data shows that in May, China's lithium carbonate imports increased by 15.9% month on month, and the LCE equivalent of lithium concentrate imports was about 70734 tons, a month on month increase of 28.2%.
According to Wujiang's calculation, the current smelting cost of Australian ore is 96600 yuan/ton, and the cost of lithium mica is 84000 yuan/ton. When there is an inverted hanging situation in the external ore, it may cause partial production reduction.
According to Mysteel's data on June 26th, out of 42 lithium salt production units, 7 have recently experienced shutdown maintenance, mostly in single factories or production lines. The shutdown maintenance in the sample enterprises is expected to result in a month on month decrease of 1400 tons in July production, with a relatively small decrease.
Looking ahead to the future, Guotai Junan Futures stated that the core reason for the significant decline in lithium carbonate prices is still the loose fundamentals of supply and demand and warehouse receipt pressure. Although the maintenance of large factories has reduced supply, it still cannot shake the current surplus pattern.
From the perspective of the entire industry chain, according to the statistical analysis of Zhongyuan Securities Research Report, since 2024, the lithium battery sector has cumulatively fallen by 26.43%, with a significantly weaker trend than the Shanghai and Shenzhen 300 Index. According to Wind data, as of the close of June 28th, the total market value of the A-share lithium battery sector is about 2800 billion yuan.
Some institutions believe that in the current context of strong supply and weak demand, attention can be paid to the phased market driven by short-term supply-demand mismatch. At present, the market is more concerned about the opportunity for lithium carbonate consumption to shift from the off-season to the peak season in August. The end of the third quarter to the fourth quarter is the traditional peak season for lithium battery terminal consumption. If battery material companies concentrate on stocking up, social inventory may be depleted.