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★ Shrinking Profits and External Disturbances
Non-integrated converters in China have been facing a cash-negative situation since March, mainly due to the price disparity between lithium product streams. This has resulted in a decline in the output of lithium chemicals this year. Moreover, Australia's spodumene concentrate production in 1Q23 has been disappointing due to external disturbances.
★ Terminal Demand Remains Steady despite Short-Term Disruptions
1H23 can be considered as a vacuum period for the Chinese EV market, as part of the demand has either been front-loaded or delayed. However, we anticipate that demand will rebound during the second half of the year due to strong seasonality and an increase in purchasing power. Moreover, the long-term trend of rapid growth in terminal demand for both EVs and energy storage batteries remains unchanged.
★ Impact of Speculative Demand on Fundamentals
With the relatively small market and a long industrial chain, speculative demand has a huge impact on lithium fundamentals. The active destocking of midstream is the core reason for the previous drop in lithium price. The upswing of the inventory cycle is expected to further boost the demand in 2H23. Through the change in the spread between the spot price and the Wuxi Exchange price, we believe market confidence is gradually recovering now.
★ Lithium market outlook
Based on our quarterly balance, the Chinese lithium market will experience a tight balance in 2H23, and lithium prices may go upward with fluctuation due to this improvement in fundamentals.
While there may be a rebound in lithium prices during 2H23, our annual balance forecast shows a continuous surplus towards 2025. Achieving long-term balance requires squeezing out some marginal supply, which indicates lithium prices may fall below the 75th percentile of the cost curve for at least a period of time in the next three years.
★ Risk Warning
Short-term demand falls short of expectations. Construction of new capacity falls behind schedule.
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发表于 2023-6-16 13:57:05
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