Lithium carbonate prices to rise
----Interview with Zairong Lei
General Manager
Panzhihua Seven-Stars Optoelectronic Tech. Co., Ltd.
- Established on February 19, 2016, Panzhihua Seven-Stars Optoelectronic Tech. Co., Ltd. (hereinafter referred to as Seven Star Optoelectronics) is an emerging technology company that integrates lithium battery material research, development and production. The company adheres to the core concept of "innovative technology is the foundation, scientific research is the premise," and proposes a new cultural connotation of "promoting the spirit of craftsmanship, creating high-quality products, and striving for first-class service." The company requires employees to reach a new height of "craftsmanship, ingenuity, and soul" with all their heart and soul. The company has successfully developed two products, namely iron phosphate and lithium carbonate, with main technical indicators reaching domestic and international advanced levels.
- Asian Metal: Hello, Mr. Lei, welcome to Asian Metal's interview. First, could you briefly introduce your company and its main business?
- Mr. Lei: Our company has 1,000 employees and is committed to producing two main products, namely lithium carbonate and iron phosphate. The annual production capacity of lithium carbonate is 20,000t, while that of iron phosphate reaches 60,000t. In the production process of lithium carbonate, we use a variety of raw materials, including lepidolite, spodumene, as well as cathode materials from waste batteries, and even electrolytes and overhaul slag from aluminum plants are effectively utilized. To ensure the continuity of production, we purchase 400,000t of raw materials every year.
- Asian Metal: The prices of lithium carbonate fluctuated greatly in recent years. In the second half of 2020, the prices of lithium carbonate hovered between RMB30,000/t (USD4,222/t) to RMB40,000/t(USD5,630/t) , but by the end of 2022, it surged to nearly RMB600,000/t (USD84,452/t). Since then, the prices declined and are currently fluctuating at around RMB100,000/t(USD14,075/t) to RMB110,000/t(USD15 482/t). What do you think of such drastic price fluctuations?
- Mr. Lei: The recent volatility in the prices of lithium carbonate is mainly due to the rapid development of the NEV industry, which led to a sharp increase in global demand for lithium salts. Specifically, from 2020 to 2022, global demand for lithium salts increased by approximately 300,000t per year. However, due to the supply side's inability to keep pace, a demand gap created, driving the rapid rise in the price of lithium carbonate. Under the impetus of rising prices, the entire industry chain quickly expanded its production capacity, and a large amount of capital flowed into the market. However, after 2022, market demand did not grow as expected, leading to a market bubble and a subsequent decline in the price of lithium carbonate. Therefore, the fluctuation in the price of lithium carbonate is the result of changes in market demand and supply. Currently, the price is still hovering around RMB100,000/t(USD/t) to 110,000(USD/t), which reflects the market's gradual adjustment and search for a new balance point.
- Asian Metal: In Q1 and Q2 of 2024, the market sees a noticeable upward trend in the prices of lithium carbonate. Could you share with us the main reasons behind this? Also, how does your company benefit from this price surge?
- Mr. Lei: First, with the subsiding of the COVID-19 pandemic, the new energy vehicle market witnessed a significouldt growth. Sales of NEV in the first quarter of 2024 increased by about 30% YoY, causing global lithium carbonate consumption to exceed 200,000t in Q1. This year is the first year that the lithium carbonate market witnesses a demand gap, while the market experienced a bubble previously due to the significouldt influx of capital. As the bubble gradually dissipates, if the total demand this year really reaches 1.2 million, the supply of lithium carbonate would appear relatively tight in the next 9 months. Second, lithium carbonate producers currently face the problem of tight inventory. According to statistics, the lithium carbonate inventory at the end of 2023 decreased by about 150,000t compared to the same period of 2022. It is expected that by 2024 there would be no surplus inventory for consumption, yet demand keeps growing. In addition, the production of lithium carbonate in China decreased significouldtly by about 50% from January to March this year, which undoubtedly intensified the supply shortage on the market. After entering April, the demand for lithium carbonate in China expected to reach about 70,000t per month. On a global scale, the demand for lithium carbonate per month expected to reach 100,000t, of which the overseas market accounts for about 30,000t, plus China's demand, the total demand is huge. However, it is worrying that we expect global lithium carbonate production to be far from sufficient to meet this huge demand. Worse still, it is expected that lithium salt producers would have no inventory this year, which means that the supply on the market would be even tighter. All these factors come together to drive up the price of lithium carbonate. In addition, changes in downstream payment terms also reflect changes in supply and demand. From payment after delivery before February to payment before delivery in March, and to requiring downstream clients to make advance payment in April, these changes indicate that the supply is becoming increasingly tight, and the cathode material plants are willing to adopt prepayments to lock in the supply. However, despite the continuous rise in lithium carbonate market prices, our company didn't benefit from it. Due to the high cost of raw materials such as waste materials, the production cost of lithium carbonate is as high as about RMB110,000/t, which directly leads to our expectation of losing more than 10 million yuan in March.
- Asian Metal: Although the prices of lithium carbonate rose, many companies still face financial losses. What do you think is the main reason for this phenomenon? How does your company deal with this challenge?
- Mr. Lei: The core reason for this phenomenon is that the grade of lithium ore is too low, resulting in high production costs for the companies. Currently, many companies choose to use Africould ores as raw materials, but if the price of lithium carbonate could not stay above RMB130,000/t, these lithium carbonate producers would face losses. For example, producing one ton of lithium carbonate, if using spodumene with a grade of about 3%, it would require about 20t of spodumene; while using lepidolite with a grade of about 1.8%, it would require more than 30t of lepidolite. In addition, the cost of impurity removal also remains high, further exacerbating the economic pressure on companies. However, unfortunately, our company didn't find an effective solution to deal with this problem.
- Asian Metal: Currently, China's production of lithium carbonate still heavily relies on imported raw materials. Do you think this dependence would restrict the healthy development of China's lithium carbonate market? Does your company have any coping strategies to reduce this dependence?
- Mr. Lei: The stability and prosperity of the lithium carbonate market remains inseparable from sufficient lithium resource supply. Although existing lithium mines in Australia could still maintain profitability, due to the low price of lithium carbonate, mines including those in Australia have little interest in investing in expanding capacity. This means that China's production of lithium carbonate may still face challenges in raw material supply for some time to come. To reduce our dependence on foreign lithium mines, our company mainly focuses on recycling business. By recycling waste materials containing lithium, such as waste batteries, we could achieve the recycling and reuse of lithium resources, reducing our reliance on new mineral resources.
- Asian Metal: Currently, the first few batches of NEV batteries entered the recycling stage. How do you assess the current scale of the recycling industry, and what is your outlook on its growth rate in the next three years?
- Mr. Lei: Based on incomplete statistics, the output of lithium carbonate produced through battery recycling is expected to reach around 20,000t per year in the next one to two years. This indicates that the recycling industry already achieved a certain scale, and with the continuous expansion of EV markets and increasing battery retirement, the scale of the recycling industry is expected to further expand. Therefore, I predict that the scale of the industry would continue doubling in the next three years.
- Asian Metal: We understand that Panzhihua Seven-Stars Optoelectronic Tech. Co., Ltd. has a leading position in lithium research and development technology. What makes it unique lies in its ability to extract lithium carbonate from both lithium ores and waste materials. Could you elaborate on your company's technological advantages in lithium ore refinement and waste material utilization?
- Mr. Lei: First, our company has a complete and diverse extraction equipment configuration, including four roasting kilns and rotary kilns, which could efficiently extract different types of raw materials. This comprehensive equipment configuration makes our overall production scale much larger than that of an ordinary lithium factories, ensuring our strong ability in lithium resource extraction. At the same time, our fixed asset investment stays more than twice than that of ordinary lithium salt factories. Second, our company has significant advantages in technology research and development. As the first company in China to use sulfate roasting lepidolite to produce lithium carbonate, we was dedicated to the efficient utilization of lithium resources and the innovation of recycling and utilization technologies. Since 2000, we focused on waste utilization and accumulated rich experience and technical strength. Now, in lithium resource recycling and utilization, we could be able to handle various lithium-containing resources and extract them into lithium carbonate products.
- Asian Metal: Could you share your company's plans and objectives in technology research and development and market expansion for its future development?
- Mr. Lei: Our company's future core goal is to optimize the processing of battery recycling materials. The unique geographical advantage of Panzhihua provides us with a rich resource base, including abundant lithium slag and various metal tailing landfills, as well as government-supported recycling quotas, all of which provide strong support for our recycling business. In addition, the mature recycling industry chain in Panzhihua provides a convenient condition for us to carry out large-scale recycling of waste batteries and lithium ore waste.
- Asian Metal: Since 2023, the demand for lithium carbonate in the new energy industry slowed down. What do you think is the main reason for this phenomenon?
- Mr. Lei: I have a different opinion on this view. In fact, from the data's perspective, the global demand for lithium salts keeps continuously increasing. In 2021, the global consumption of lithium salts was 500,000t, which increased to 700,000t in 2022 and 1 million in 2023. Moreover, it is expected to exceed 1.2 million this year. This growth trend indicates that the demand for lithium carbonate in the new energy industry has not slowed down. Therefore, I believe that the development demand for lithium carbonate in the new energy industry still remains strong.
- Asian Metal: What is your view on the trend of lithium carbonate prices in 2024?
- Mr. Lei: We have a positive outlook on the trend of lithium carbonate prices in 2024. We believe that only when the prices of lithium carbonate remain stable at around RMB200,000/t, could the upstream and downstream industries maintain a healthy development trend. However, the current price of lithium carbonate relatively remains low, which is not conducive to the long-term stable development of the industry. Based on last year's statistics, the average price of battery-grade lithium carbonate in China was maintained at around RMB258,000/t. Based on this, we predict that the average price of lithium carbonate this year should not be lower than this level. In addition, we expect the energy storage industry to see significant growth this year, with the demand for LFP expected to exceed 2 million. In such a market environment, the price of lithium carbonate needs to be maintained at least above RMB200,000/t to ensure stable supply. Therefore, we believe that the price of lithium carbonate in China would show an upward trend this year.
- Asian Metal: The development of the new energy industry as a crucial field of current and future development, what opportunities and challenges do you think it would face in the next three years? What is the position and role of your company in this industry?
- Mr. Lei: The new energy industry is an important driver of the Chinese economy, and it is also the only way to achieve long-term national development. With the continuous progress of technologies such as artificial intelligence, the use of renewable energy would become more extensive and efficient. For companies, as long as they focus on their work, they could seize many opportunities in this industry. As for challenges, innovation is the most critical challenge. Only through continuous innovation, could companies maintain their competitive advantages in the new energy industry and achieve sustainable development. Our next core goal would focus on the lithium battery recycling business. We would flexibly adjust the scale of the business according to the profit situation, increasing investment when profits are abundant and reducing investment moderately when profits are low. Overall, we would plan and manage the lithium battery recycling business scientifically and rationally based on profitability to achieve the stable development of our company.
- Asian Metal: Thank you for sharing with us, Mr. Lei. We wish your company a prosperous business.
- Mr. Lei: Thank you.
