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Analysis On the Current Status and Future Development Trend of China’s Lithium Industry

Recently, the 2016 Lithium Industry Forum, an event hosted by the China Nonferrous Metals Industry Association Lithium Branch, opened in Xining, Qinghai Province. Li Bingxin, Deputy Secretary-general of the China Nonferrous Metals Industry Association Lithium Branch, shared the operation condition and future development trend of China’s lithium industry at the Forum, he briefly explained the reasons of fast surge of lithium price in 2015, current status of lithium resource consumption and supply, and lithium resource development progress etc, and analyzed future development trends of the lithium industry.

In 2015, lithium price rose quickly, in 2015 industrial-grade carbonate lithium reached an annual average price of 47700 yuan/tonne, up by 34% on Y-o-Y basis; annual average price of battery grade carbonate lithium is 56700 yuan/tonne, up by 41% on Y-o-Y basis; annual average price of lithium hydroxide is 50000 yuan/tonne, up by 25% on Y-o-Y basis, battery grade carbonate lithium price rose by 3 folds in one year.

According to Li Bingxin, the reasons of lithium price hike can be mainly attributed to rapid growth in lithium consumption resulting from the explosive development of new energy vehicle industry. Since 2012 new energy vehicle industry recorded rapid expansion, meanwhile it brought along rapid expansion of battery industry and battery material industry (carbonate lithium only accounts for 10%~20% in the material, accounting for 6%~8% of battery cost). Meanwhile, lithium resource development project has long development cycle, the construction cycle is generally between 18~24 months, commissioning needs one half year to one year, which triggers supply-demand imbalance of lithium resource.

Today China has become an indisputable lithium consumption power. According to statistics of the Lithium Branch, in 2014 China’s total lithium consumption reached 65800 tonnes, accounting for 40% of global total lithium consumption, which was 162,000 tonnes. In 2015, China’s lithium consumption was 78,700 tonnes, up by 20% on Y-o-Y basis.

Nevertheless, the increment of China’s lithium salt supply volume is limited despite its steady increase each year, according to statistics, in 2015 lithium supply volume is 61400 tonnes, keeping at the same level on Y-o-Y basis; the global lithium salt output is 163,000 tonnes, in which China accounts for 38%. In 2014 China’s carbonate lithium output reachs 41,600 tonnes, up by 9.5% on Y-o-Y basis. In 2015 China’s carbonate lithium output is 42,000 tonnes, up by 1% on Y-o-Y basis.

In 2015 China’s lithium hydroxide output is 22,000 tonnes, keeping at the same level on Y-o-Y basis; global lithium hydroxide output is 33,500 tonnes, in which China accounts for 68%. Wherein, Tianqi Lithium Industries newly added 5000 tonnes of lithium hydroxide production line, which was launched into production in July 2013, annual output is 3000 tonnes; Ganfeng Lithium’s 10000 tonnes lithium salt project has been completed, currently it mainly uses Australia Talison Spodumene ore to produce lithium hydroxide and lithium chloride, in 2014 the company’s lithium hydroxide output is about 3000 tonnes.

According to reports of the United States Geological Survey (USGS) in 2015, the worldwide proven lithium resource volume was 39.50 million tonnes (metal volume), lithium reserve was 14 million tonnes. Converted according to resource volume, carbonate lithium equivalent is about 200 million tonnes, global annual output is 160,000 tonnes, capable of meeting the needs of 100 year above exploitation. Wherein, China’s lithium resource volume reaches 5.40 million tonnes, lithium reserve is 3.20 million tonnes, besides it has very good salt lake lithium resource.

Despite the fact that China has abundant lithium resources, lithium extraction from brine has limited output. Wherein, output of carbonate lithium and lithium hydroxide by salt lake enterprise manufacture is 10000 tonnes, Qinghai Lithium, Qinghai CITIC Guoan, and Lake Lithium in Qinghai region all have capacity release, compared to previous years, output increase is relatively obvious. Compared to domestic enterprises, Chile SQM Company, USA FMC Company and Albemarle Corporation have a combined lithium salt output of close to 100,000 tonnes.

China’s Spodumene output is diminishing, external dependence is high. In 2014, Luxiang Co., Ltd, Zhonghe Co., Ltd, and Western Resources did not produce any lithium ore due to upgrading or expansion, inside China other lithium mines reduced Spodumene concentrate output. In 2015, China’s Spodumene concentrate output is about 25,000 tonnes, but import Spodumene concentrate is up to 360,000 tonnes.

China’s lithium product processing has very high external dependence on raw material, import has been maintained for a long period of time. In lithium salt production, the sources of raw materials is rather complex, in which the absolute majority still relies on import Spodumene process, the percentage rises from 66% to 70%; a small number of Chinese enterprises import high concentration brine from overseas for processing, which accounts for 16%; the practice of using domestic brine and mineral resources for lithium salt production accounts for 14%, in which lithium extraction from brine is even less.

China’s carbonate lithium import has limited supplementation effect, currently China’s import volume is declining, Japan’s import volume is growing, import volume is around 12000 tonnes. On the other hand, China massively exports lithium hydroxide, last year the export volume increased by 50%. Owing to impact of price gap, this year the export part is mainly converted to domestic sale.

According to Li Bingxin’s estimate, in 2016 the increase in lithium resource supply will be limited, considering the launching schedule of other newly added capacity (salt lake, mine) already being planned, total newly added capacity is about 230,000 tonnes, but due to the special nature of lithium resource supply, the construction cycle of newly added mine is generally above 3~5 years, wherein newly added salt lake needs still longer development cycle, which is up to 5~7 years, therefore launching progress of newly added capacity is expected to be relatively slow.

It is expected in the 4th quarter this year lithium industry supply will slightly increase, if the market restores rational trading, the price will fluctuate moderately, and there is limited space for downward price adjustment.