The Hot Spot Of "Lithium" Is In A Dilemma: The Capacity Expansion Of 164000 Tons Of Lithium Salt Is Not Owned By Everyone

Dong Peng, researcher of the 21st Century Capital Research Institute

The high prospect of lithium salt industry is attracting more and more capital. For example, Hainan mining plans to build 20000 tons of lithium hydroxide production capacity.

It's just that money is not easy to make.

When Hainan mining capacity is released, the company may face extremely fierce competition.

According to the statistics of the 21st Century Capital Research Institute, including listed companies such as Tianqi Lithium Industry Co., Ltd. and China National Mineral Resources Co., Ltd., it is clear that the lithium salt production capacity planned to be put into production in the third quarter of this year or before the end of the year is as high as 164 thousand tons.

What is the concept?

According to Feng Ying, an industry analyst of Baichuan Yingfu lithium industry, by the end of 2020, the domestic capacity of lithium carbonate is 469000 tons, the capacity of lithium hydroxide is 239500 tons, and the total capacity of lithium salt is 708500 tons. Equivalent to, in the second half of this year alone, the domestic lithium salt production capacity will increase by 23.15%.

Contrary to the huge capacity, the capacity utilization rate of lithium salt enterprises is low. In 2020, the domestic lithium carbonate capacity utilization rate is less than 40%, and Ganfeng lithium industry's lithium carbonate capacity utilization rate of nearly 57% has been in the forefront of the industry.

The 21st Century Institute of capital research shows that although the price of lithium salt products has risen sharply and the terminal demand has exploded this year, various manufacturers are trying their best to increase the volume, but the core problem is the increasingly tense raw material end.

Huge production capacity and shortage of raw materials

On August 19, the annual output of 25000 tons of battery grade lithium hydroxide and battery grade lithium carbonate production line project of sinomine resources was completed, and the pilot production of ignition and feeding was successful.

This is only a part of the new capacity of domestic lithium salt in the second half of the year.

From the perspective of the newly added capacity in the third quarter, it also includes the 20000 ton battery grade lithium carbonate project of Lanke lithium industry, the 20000 ton battery grade lithium hydroxide technical transformation project of Tianyi lithium industry phase I, and the battery grade lithium carbonate project of Yongxing materials and Rongjie lithium industry.

It is expected that Tianqi lithium industry, Tianyi lithium industry and Shengxin lithium energy Co., Ltd. will be put into operation within the year, and all the new capacity will be lithium hydroxide.

Among them, Tianyi lithium industry is a 25000 ton battery grade project in phase II, and the first phase of 20000 tons of lithium hydroxide project in Suining Shengxin, a subsidiary of Shengxin lithium energy, is expected to be completed by the end of this year or early next year.

Tianqi lithium is a 24000 ton project of quina phase I in Australia. The company's latest statement is "strive to realize the full line connection and operation of the project by the end of 2021".

All the above new projects are included, and the total production capacity exceeds 160000 tons.

Of course, production capacity is not equal to output, and capacity release needs a climbing process. Lithium salt is different from other commodities. After being put into production, equipment and technical debugging are needed to ensure the consistency of products. It usually takes about 12 months to reach the production capacity.

With the gradual release of lithium production capacity, the demand for raw materials is also in a slow growth state.

It should be pointed out that in the above-mentioned new production capacity, in addition to the old brine used by Lanke lithium industry and the green bush lithium concentrate used by Tianqi lithium industry, the raw materials required by some enterprises still need to be purchased.

Taking sinomine resources as an example, the Tanco mining area in Canada under the company is recovering mining, with the original ore production scale of 120000 tons / year. However, after the above 25000 tons of lithium salt production capacity was put into operation, plus the expanded 6000 tons of lithium fluoride capacity, the total lithium salt production capacity of the company reached 31000 tons.

In this regard, the company recently said that "Tanco mining area can only provide some raw materials, spodumene still needs a certain proportion of external mining, and the company has signed the corresponding underwriting agreement."

On the contrary, spodumene accounts for the highest proportion, followed by salt lake and lepidolite. Even if the salt lake and lepidolite increase, it is difficult to make up for the supply gap of lithium concentrate in the second half of the year.

Australia is the main producer and exporter of spodumene, and the top lithium resources in terms of grade, reserves and output have been locked in. For example, Greenbush lithium is only supplied to Tianqi lithium and Yabao, and mount Marion lithium is sold by Ganfeng lithium.

Due to the fact that the main mines have been controlled by the lithium industry giants through holding shares, holding shares, or signing an underwriting agreement, there are very limited lithium concentrates in the market circulation in Western Australia.

Driven by multiple factors, the supply of lithium concentrate has begun to be tight, and the price has continued to rise.

"Even if the new capacity is put into operation smoothly in the year, it will still take time from the first bag of products to large-scale production, which is not expected to have a significant impact on the supply pattern of lithium salt in the year." Feng Ying thinks.

In contrast, the core of the short-term leading industry operation trend is the raw material side, not the production capacity side.

Profit elasticity of lithium salt enterprises will be differentiated

It is more accurate to say that "lithium goes all over the world".

In terms of lithium salt products, the price of lithium carbonate remained high throughout the second quarter, but since August, the price of this product has started a new round of rise.

According to the price given by Qu Lin, an analyst in the lithium carbonate industry of the business association, on August 25, the price range of industrial grade lithium carbonate was 103000-110000 yuan / ton, and that of battery grade was 108000-125000 yuan / ton.

At the beginning of August, the transaction price of industrial grade lithium carbonate remained at 89000 yuan / ton.

The reason for the second rise of lithium salt price includes the rising price of raw material lithium concentrate, which will directly affect the profitability of lithium salt production enterprises.

According to SMM data, on August 18, the average price of spodumene concentrate (6% grade CIF China) was 875 US dollars / ton, an increase of 457.5 US dollars / ton compared with the end of last year, and a sharp rise of 109.6% in the year.

With the rapid rise of cost side, the profitability of lithium salt production enterprises is facing differentiation.

One is that "ore + salt" enterprises with upstream and midstream lithium production capacity benefit from the cost advantage of the whole industrial chain, and their profit margin is significantly increased.

The other is that enterprises with only lithium salt capacity and raw materials to be purchased or a small part of them are self-sufficient will face the problem of profit space being compressed after the rise of lithium concentrate.

The above judgment is based on the cost composition of lithium salt production.

Taking the production of lithium carbonate from spodumene as an example, the cost mainly consists of lithium concentrate and processing cost. Each ton of lithium carbonate needs to consume 8-9 tons of lithium concentrate, and the processing cost is about 17000-18000 yuan.

According to the above standards, the 21st Century Capital Research Institute estimates that by the end of 2020, the production cost of lithium carbonate per ton will be about 43700 yuan / ton, and when the price of lithium concentrate rises to nearly 900 US dollars, the production cost has risen to 68000 yuan / ton.

For the "integrated" leaders who have participated in shares, held shares or signed underwriting agreements, the impact of lithium concentrate rise can be reduced to a certain extent by coordinating the internal purchase price.

As for some enterprises that sell and consolidate their lithium concentrate, because their mining costs are relatively stable, they can enjoy the dividend of lithium concentrate price rise in the second half of the year. In the future, the gross profit margin of this business is bound to increase significantly.

In other words, as long as the price of lithium concentrate and lithium salt rises, the total profit of the above enterprises will maintain the expansion state.

In contrast, lithium salt enterprises with low proportion of self-sufficiency in raw materials not only need to purchase at high prices, but also have their own production capacity even "not enough to eat" when the overall supply of lithium concentrate is tight.

As for the large amount of new production capacity that may be idle, it is possible to become a "OEM" role in the future.

Recently, a lithium salt production enterprise reported to the 21st century capital research institute that the company was looking for some opportunities for OEM.

Tianqi lithium industry, which may be the most abundant lithium concentrate supply in China, has also publicly stated that "talison lithium concentrate is planned and produced according to the demand of Tianqi and Yabao shareholders, and the company will reasonably consider whether to adopt the form of substitute processing in combination with the supply and demand situation of downstream lithium salt and the price rise."

However, the profits of the agent are nothing more than processing fees, and the profit margin is far from comparable with the self owned mining enterprises.

Third quarter profit continued to rise

Although the semi annual reports of lithium salt enterprises have not been disclosed completely, and the head companies have delayed to release them until the last two days, the known data are sufficient to verify the Growth Logic of the industry.

The specific performance is driven by the quantity and price.

The price is needless to say.

In the first half of 2020, the average price of lithium carbonate will reach 46400 yuan / ton, and the average price will rise to 81900 yuan / ton in the first half of 2021.

The cost side of lithium salt enterprises is fixed, and the part of price increase is almost profit; The output of outsourcing mining enterprises increased by 35500 yuan per ton, which was higher than the cost by 24000 yuan. The profit margin also kept increasing, but the range was slightly smaller.

Production and sales data, not to mention, driven by the rapid rebound in product profit margin and strong downstream demand, lithium salt enterprises are trying their best to release capacity.

When asked about this year's capacity release situation, people from Ganfeng lithium industry recently gave a definite reply that "the capacity utilization rate in the first half of the year is higher than that of last year".

Taking Shengxin lithium energy semi annual report as an example, in the first half of the year, the output of lithium salt products was 18500 tons, with a year-on-year increase of 150.24%, and the sales volume was 17700 tons, with a year-on-year increase of 324.35%.

In terms of profitability, the company's lithium product sales revenue was RMB 990 million, with a year-on-year increase of 484.20%, and the gross profit margin changed from loss to profit to 36.24%.

Other companies did not disclose such details in the semi annual report, but the lithium salt business income also increased significantly, with the lithium salt business income of sinomine resources increasing by 163.88%, and the lithium carbonate product income of jiangte Electric Machinery Co., Ltd. increased by 251.59%.

The part of revenue growth greater than product price increase may be due to the increase of production and sales volume of the company.

It should be pointed out that due to the cost support brought by the rise of lithium concentrate, the increasing demand for power battery materials in the third quarter and the tight market supply, lithium salt prices rose again in the third quarter.

Among them, the price of lithium hydroxide was 94000 yuan / ton at the beginning of July, 119000 yuan / ton on August 26, and the price of lithium carbonate increased from 88000 yuan / ton to 108000 yuan / ton in the same period.

According to the logic of the increase in the price of the above-mentioned products, the overall profitability of lithium salt enterprises in the third quarter of this year will be further improved compared with that in the second quarter.

Specifically for listed companies, the 21st Century Capital Research Institute believes that under the background of rapidly rising cost, the performance elasticity of the integrated lithium salt production enterprises with mine end advantages will be significantly higher than that of lithium salt enterprises with insufficient self-sufficiency rate and external raw materials; It is not ruled out that enterprises rich in lithium resources will seek OEM.

However, the fluctuation risk of secondary market should not be ignored.

Although we can not rule out the possibility that this core track will continue to be crowded and the risk preference of secondary market will further increase, as far as the industry prosperity is concerned, it has reached the middle game.

Taking the historical price of lithium carbonate as an example, the current price of nearly 110000 yuan / ton is also slightly above the 50% quantile of price fluctuation range since 2017.