Ann: Significant Lithium Discovery at Step Aside, page-14

Yup braun, the sparkle has gone out of lithium. The giant squid explains why:

On lithium, a primary area of caution around the bearish narrative is the cost curve support for non-integrated lithium producers with spot prices continuing to fall.

We estimate that using the onshore prices for lepidolite and spodumene, the cost of production for non-integrated lithium carbonate is RMB 157k/t and RMB 197k/t, respectively (vs. integrated cash cost of RMB 100k/t).

The cost curve support has indeed been reflected in this week’s rally of Chinese\ lithium carbonate futures (which are physically settled).

Indeed, forward prices were trading well below the non-integrated cost of production, while a fall in operating rates due to supply rationing combined with seasonal maintenance has weighed on spot supply which had led to short covering.

Whilst there is some near-term support for prices in the form of improving spot demand into Q4 and some supply rationing, we remain bearish on China lithium carbonate spot prices (12m target at $15,000/t) given our expectation of the upcoming surplus in the market over 2024.