CITIC Securities: Lithium prices plummeted, deteriorated, and is expected to rebound steadily to 150,000 yuan/ton in the future

The Zhitong Finance App learned that CITIC Securities released a research report saying that the sharp drop in lithium prices last week was mainly due to a sharp increase in weekly inventory caused by SMM lithium carbonate inventory statistics and sample adjustments; it was not a substantial deterioration in industry fundamentals. CITIC Securities expects that the recovery in lithium battery production in September will drive a considerable increase in demand. The increase on the overseas supply side will fall short of the increase in demand, and the industry's supply gap may expand further. Weekly inventory noise is difficult to reverse the fundamental logic of the industry. It is expected that lithium prices have clearly fallen sharply in the short term, and lithium prices are expected to rebound steadily to 150,000 yuan/ton in the future, driving the recovery of the lithium sector.

SMM lithium carbonate industry inventory increased, leading to a sharp drop in lithium prices last week

According to Wind, the main contract for lithium carbonate futures fell 9.0% to 142,000 yuan/ton last week, and fluctuations increased significantly. CITIC Securities believes that it is mainly due to the third-party consulting agency Shanghai Nonferrous Metals Network (SMM) updating lithium carbonate inventory data. According to SMM, the new lithium carbonate inventory data added on September 4 was 169,300 tons, while the large sample inventory of lithium carbonate announced by the agency the day before was 75,700 tons. The new inventory volume of nearly 100,000 tons was added, causing the market to be pessimistic about the fundamentals of lithium carbonate, and lithium prices fell sharply due to panic.

Single inventory data may be biased, and lithium salt stocks will continue to decrease in September

CITIC Securities believes that there may be research biases in the lithium salt inventory data of a single agency. Inventory data caliber and sample adjustments are normal in the industry, such as whether sample coverage, current statistical caliber, statistical methods, and estimation models have changed, whether historical data has been revised retroactively, and whether the scope of statistics includes factory warehouses and in-transit inventory are all factors that should be considered. Short-term data changes do not indicate major changes in the fundamentals of supply and demand; they are likely due to iterative statistical rules. CITIC Securities believes that it is necessary to combine inventory data with recent supply and demand data to analyze fundamentals. According to Dadong Times Think Tank, global lithium battery production increased 9.1% month-on-month in September, and CITIC Securities estimated an increase of 15,000 tons of LCE in response to lithium carbonate demand. CITIC Securities expects the supply-side increase in the volume of lithium concentrate arriving in Hong Kong in September. With the smooth shipment of lithium concentrate from China Mining Resources and other companies, the supply of lithium salt is expected to increase by 0.8-10,000 tons of LCE over the previous month. Therefore, the supply shortage level will continue to increase in September, the amount of lithium carbonate being stored will increase, and the trend of lithium salt going to storage will remain unchanged.

The actual inventory level is gradually revealed, and subsequent sudden changes in inventory data will be reduced

CITIC Securities believes that it was difficult to confirm the actual inventory level of the lithium carbonate industry before, mainly because some hidden lithium salt stocks were difficult to determine, and it was difficult for consulting agencies such as SMM to fully count hidden inventories. However, as the futures market matures, some hidden inventories are gradually revealed in the form of hedging, and registration data for lithium carbonate futures warehouse receipts can reflect changes in hidden inventories to a certain extent. Combining data on upstream and downstream inventory, trader inventory, and futures warehouse receipts, you can basically see the changing trend of inventory in the entire industrial chain. Furthermore, as the maturity of the lithium industry increases, the market's statistical accuracy of inventory will be higher, and sudden changes in inventory may decrease.

Short-term inventory changes are difficult to influence long-term trends, and lithium prices are still determined by long-term fundamental trends

In the long run, changes in commodity prices are still determined by macroeconomic trends and industry fundamentals. Looking back at the current upward cycle of lithium carbonate, in a phase where market demand for long-term lithium batteries is growing rapidly and supply disturbances are frequent, the weekly increase in lithium salt inventories cannot reverse the upward trend in lithium prices; at a stage where market expectations for future market demand for lithium batteries are weak, weekly lithium salt inventories continue to decline, but lithium prices have maintained a downward trend. Therefore, CITIC Securities believes that weekly inventory changes cannot reflect medium- to long-term trends, and judgments should be made based on monthly trend changes combined with industry data to prevent high-frequency noise from interfering with core investment logic.