From the second half of 2020 to 2022Q1, downstream terminal demand exploded and upstream resource supply elasticity was lacking. Since 2022Q2, the resource expansion has begun to respond, but the progress of greenfield projects has been significantly slower than expected.
Supply has not outperformed demand, and the intensity of supply and demand has supported a new high of lithium prices in Q4. In the short term of 2023, lithium prices will fluctuate greatly. In the mid-term 2024-2025, driven by the world's demand for power and energy storage, coupled with supply chain factors and higher cost curves, it will be difficult for lithium prices to return to the previous trough.
Lithium prices will fluctuate greatly in 2023
Four dimensions of lithium demand: terminal installed capacity demand, the demand for the necessary cycle of the supply chain, the demand for initial inventory, and the demand for desirable inventory. The Chinese market has a high impact weight, and the forecast for the growth rate of terminal demand in 2023 should not be extrapolated linearly.
The production capacity of lithium battery materials and batteries has been greatly expanded, and raw materials are the prerequisite for achieving installed capacity share, which intensifies resource anxiety. According to the forecast, about 840,000 tons of LCE in 2022, 1.07 million tons of LCE in 2023, and 1.97 million tons of LCE in 2025.
Explore the supply elasticity of lithium resources from 2023 to 2025
Total supply and incremental structure
It is estimated that the increase in the supply of lithium raw materials in the world (excluding recycling) will be about 760,000 tons in 2022, an increase of 370,000 tons to 1.12 million tons in 2023, and 1.89 million tons of LCE in 2025.
In terms of regions, it is expected that the increase in 2023 will mainly come from Australia (120,000 tons), China (80,000 tons), Chile (70,000 tons), Argentina (40,000 tons) and Africa (20,000 tons). In terms of minerals, it is estimated that the incremental structure in 2023 will be 180,000 tons of spodumene, 130,000 tons of salt lake, and 60,000 tons of mica.
Lithium extraction from ore
Lithium extraction from ore is a highly elastic supply source with relatively efficient production, easy replication of production lines, and mature and stable processes. According to estimates, the world's hard rock lithium mine capacity is expected to increase from 790,000 tons of LCE to 1.15 million tons of LCE in 2022-2023, and to 1.89 million tons of LCE in 2025.
In 2022-2023, the world's hard rock lithium mine production is expected to increase from 420,000 tons of LCE to 660,000 tons of LCE, and to 1.12 million tons of LCE in 2025. From 2023 to 2025, besides Australia, Africa, China (mica), Brazil and Canada will form important increments.
Lithium extraction from salt lakes
In 2022-2023, the world's salt lake lithium extraction capacity is expected to increase from 490,000 tons of LCE to 620,000 tons of LCE, and to 1.02 million tons of LCE in 2025. The resource scale of the salt lake type lithium resource monomer project is usually considerable, which can support a high annual production capacity, and at the same time, the production cost is low, and the environmental pressure of tailings treatment is relatively small.
However, most of the salt lakes are located in remote, low-infrastructure, and arduous high-cold and high-altitude areas. The initial investment in the construction of salt fields is large, one lake is one process, and the brine drying cycle is long, so it is difficult to respond sensitively to the outbreak of downstream demand.
In addition, the entrainment loss of lithium in the salt field system is large, and the current overall yield is low, which restricts the value of lithium resources in salt lakes. From the perspective of development, technology will be a blessing for resources, and efficient lithium-enhancing paths such as adsorption in the future are expected to break the constraints of efficiency.
Profound changes in the world's lithium resource supply system
Evolution of lithium product pricingThe pricing logic of fine chemicals → the pricing logic of bulk commodities. The overseas lithium compound long order mechanism keeps pace with the times. The lithium industry is destined to be different from iron ore. The formation of financial attributes further affects the price mechanism, and is no longer purely based on cost pricing.
Speed up vertical integration of world industrial chain
Boundary of the enterprise: When the internal transaction cost is less than the market cost, it tends to internalize the transaction and expand the business boundary. On the contrary, it tends to externalize and shrink business boundaries. In the period of rapid industrial explosion and transformation, the vertically integrated business model will bring efficiency advantages.
Nonlinear technological progress of lithium resources
The explosion of demand requires a larger-scale, more efficient, greener, lower-cost, higher-quality supply of lithium raw materials. The mining, beneficiation and smelting of lithium extraction from ores are relatively mature, but they cannot be compared with base metals.
There is still room for optimization in terms of improving recovery rate, automation rate, and low-carbon environmental protection. The salt lake lithium extraction technology has great potential for future upgrades and iterations, and the trend will shift from natural beach drying to industrialized continuous production.
Reconstruction of the world supply chain
The world division of labor has shifted from "efficiency first" to "safety first"; from "JustinTime" to "JustinCase" and "JustinWorst-Case". The world's key automotive end markets such as Europe and the United States are making efforts to build a localized closed-loop supply chain for new energy vehicles. The advantageous resource countries and miners seek to extend downstream to higher value-added products.
A more green world lithium resource supply in the futureIt will become a prerequisite for entering the supply system of the world's auto giants. Build a closed-loop lithium battery cycle ecosystem. Lower environmental footprint, lower carbon emissions, impact process design. Green power has become the standard of the world's mines and salt lake projects.
Strategic reassessment of China's high-quality lithium resourcesChina has no shortage of lithium resources, but it lacks world-class salt lakes and solid lithium ore resources that are both high-grade, large-scale, and easy to mine. According to estimates, China's external dependence on lithium raw materials will be about 70% in 2021, and the downstream lithium battery production capacity will not only be supplied to China, but also to the world. With the support of leading lithium extraction technology, efficiency advantages, and higher price levels, China's local lithium resource development is promising in the future.
Suggestions for industrial development
In the future, it is necessary to attach great importance to the "supply logic" of upstream key minerals in strategic emerging fields. Build a resilient lithium resource supply system with dual cycles between countries, and accelerate the development of lithium resources in China. Pay attention to maintaining the global layout of Chinese lithium resource enterprises and pay attention to technological changes.