Overseas Lithium mines have significantly reduced production; the supply surplus situation in 2025 is improving. It is determined that lithium carbonate prices have bottomed out, and the price center for lithium in 2025 is expected to rise. Bullish on leading companies with quality resources.
According to the Zhito Finance APP, Soochow released a Research Report stating that during the last cycle, five Australian mines announced production cuts, which was one of the important factors for halting the decline in lithium prices. In this current lithium price downturn cycle, eight Australian mines have announced production cuts so far, among which seven mines announced cuts intensively in 24H2, signaling a clear industry clearing. In 2025, there is room for inventory replenishment in the industry, with an actual growth rate expected to be nearly 30%. Supply excess is narrowing, and the central price of lithium is expected to return to 0.08-0.085 million yuan, but a true reversal in supply-demand dynamics will take longer. The large-scale production cuts of overseas lithium mines and the improvement in the supply excess landscape in 2025 indicate that the price of lithium carbonate has already bottomed out. The central price of lithium in 2025 is expected to rise, remaining bullish on leading companies with high-quality resources.
The main viewpoints of soochow securities are as follows:
In 24H2, the lithium price is fluctuating at the bottom, with high-cost projects having production cuts implemented, and the trend of industry clearing is clear.
During the last cycle, five Australian mines announced production cuts, which was one of the important factors for halting the decline in lithium prices. In this current lithium price downturn cycle, eight Australian mines have announced production cuts so far, among which seven mines announced cuts intensively in 24H2, signaling a clear industry clearing. The lithium price in 24H2 is maintained within the bottom Range, with 30-40% of Global capacity losing Cash, and Australian mines, mica, and non-mineral projects with Cash costs exceeding 0.065 million are facing production cuts. The supply estimate for 2024 has been revised down by 0.17 million tons to 1.31 million tons.
For overseas projects and domestic mica, there are large-scale production cuts, with a total supply expected to be 1.55 million tons of LCE in 2025, an increase of 18%, with new supply around 0.24 million tons.
Australian mines: except for the Greenbush mine, all other operating Australian mines have announced production cuts, affecting the supply of 0.1 million tons of LCE+ in 2025, with an expected total supply near 0.42 million tons of LCE, basically unchanged year-on-year. The actual Cash cost of Australian mines (including royalties, shipping, and maintenance capital expenditure) is basically above 850 USD. At the current price of 800 USD for minerals, over 50% of Australian mine supply is still losing Cash, and Australian mining companies, especially MRL and Liontown, face significant debt repayment pressure. It is expected that production cuts will continue, and bankruptcy restructuring cannot be ruled out.
Non-Mineral: The project progress of some Chinese enterprises has been slightly delayed, Bikita and Arcadia have stopped producing spodumene concentrate, and foreign enterprises have stalled in project progress, affecting the supply of 0.08-0.09 million tons of LCE in 2025, with an expected supply of 0.17 million tons of LCE in 2025 (assuming spodumene continues to be out of production), an increase of nearly 0.07 million tons.
Americas Mining: It is expected that the supply will be 0.08 million tons of LCE in 2025, with an increase of nearly 0.02 million tons. The cost of concentrate in Brazil is competitive (CIF cost of 450-500 USD), with significant incremental supply in 2025, while the Canadian mine is progressing slowly with the NAL project continuing to incur losses for four quarters, and cost pressure in 2025 remains significant.
South America Salars: The actual cost of new projects in Argentina is higher than expected, with production delays being common, affecting 0.03 million tons of LCE in 2025. The total supply is expected to be 0.46 million tons of LCE in 2025, with an increase of 0.07 million tons; severe inflation in Argentina in 2023-2024 has significantly increased the production costs of the salars, with inflation in the second half of 2024 already under control, and costs in 2025 are expected to be relatively stable.
Domestic: The salt lake is expected to supply 0.17 million tons in 2025, with an increase of 0.02 million tons. The progress of the Tibet project is relatively lagging, and the production time of Lagoucuo and Mami Cuo is still unclear; spodumene is expected to supply 0.05 million tons of LCE in 2025, with an increase of more than 0.03 million tons, and the Lijiagou mining has begun; muscovite, due to high costs, has seen reduced production in mines such as Jianzha窝, with an expected supply of 0.12 million tons of LCE in 2025, essentially flat year-on-year; recovery in 2024 produced 0.068 million tons, currently in a loss state, with expansion basically stagnant, and an expected supply of 0.08-0.09 million tons in 2025.
In 2025, the industry has room for inventory replenishment, with actual growth expected to be nearly 30%, supply surplus narrowing, and lithium prices expected to return to the range of 0.08-0.085 million yuan, but a true reversal of the supply and demand pattern will take longer.
Soochow Securities predicts that demand for dynamic storage will increase by 31% in 2025. The Industry Chain's Q1 is not a traditional off-season, and by the end of November, lithium carbonate inventory was equivalent to 1.2 months of demand, with inventory levels at the 10th percentile of 2021-2024, allowing some room for replenishment. If a 1.2-month inventory is maintained in 2025, lithium carbonate demand is expected to be 1.4 million tons, an increase of 23% year-on-year, with a surplus of nearly 0.15 million tons, a slight decrease year-on-year; if the inventory level rises to 1.3 months, the surplus will narrow to 0.1 million tons; if it rises to 1.5 months, supply and demand will basically achieve balance.
Looking at the cash cost curve, the demand in 2025 corresponds to a cost line of about 0.073 million yuan/ton LCE, corresponding to a tax-inclusive lithium price of about 0.082 million yuan, and it is expected that a phase of supply tightness may emerge in the second half of 2025, with the price center likely to rise. However, according to the current development project plans, there will be a supply surplus of around 0.3 million tons in 2026-2027, and a true reversal of the pattern will take longer. If there is more clearing on the supply side, the industry inflection point may be approached sooner.
Investment suggestion: With large-scale reductions and stoppages of overseas lithium mines, the surplus supply pattern in 2025 is expected to improve. It is determined that lithium carbonate prices have likely bottomed out, and the price center for lithium in 2025 is expected to rise. Bullish outlook for leaders with quality resources is suggested, recommending Sinomine Resource Group (002738.SZ), GANFENGLITHIUM (002460.SZ), Yongxing Special Materials Technology (002756.SZ), Sichuan Yahua Industrial Group (002497.SZ), Tianqi Lithium Corporation (002466.SZ), and Chengxin Lithium Group (002240.SZ), among others.
Risk warning: Lithium prices fluctuate significantly, capacity expansion falls short of expectations, and downstream demand is lower than expected.
