: The oversupply of lithium has not changed, and supply disruptions in September may support prices and lead to strong fluctuations.

Huafu Securities released a research report stating that the significant improvement in supply and demand in August drove the industry to start destocking at the end of the month, and supply disturbances in September along with strong production support have led to price fluctuations. The bank stated that the surplus situation in 2024 has not changed, and with stronger expectations of surplus in 2025 and beyond, it is difficult for lithium prices to rebound significantly. Rebalancing supply and demand still requires lithium prices to fall further. The sector is currently at the bottom of the cycle, with a more cautious outlook on lithium prices and stocks, and attention should be paid to opportunities on the left side. The main points of Huafu Securities are as follows: Investment points: Lithium ore: In August, China imported 48,000 tons of LCE, down 6% month-on-month but up 120% year-on-year. Australia accounted for 31,000 tons of LCE, down 22% month-on-month but up 77% year-on-year. From January to August, a total of 356,000 tons of LCE lithium ore was imported, up 36% year-on-year. In August, the shipment of lithium ore from Haideland Port, Australia to China increased by 36% month-on-month. Lithium carbonate: In August, consumption was 79,000 tons, down 11% month-on-month but up 43% year-on-year. Of this, domestic production was 61,000 tons, down 6% month-on-month but up 36% year-on-year; imports were 18,000 tons, down 27% month-on-month but up 63% year-on-year, with 13,000 tons imported from Chile, down 33% month-on-month. From January to August, a total of 571,000 tons were supplied, up 54% year-on-year. Of this, domestic production was 425,000 tons, up 51% year-on-year; imports were 148,000 tons, up 53% year-on-year. In August, to maintain market share and stable production, self-owned and commissioned lithium salt factories were stable, while non-integrated lithium salt factories and recycling factories decreased production due to overcapacity, and there was a significant decrease in imports from Chile. In September, the peak of positive electrode production was reached, and with supply disruptions, there is strong bullish sentiment in the upstream sector. SMM predicts a 1%-3% increase in domestic lithium carbonate production. Lithium hydroxide: In August, consumption was 13,000 tons, down 15% month-on-month and 1% year-on-year. Of this, domestic production was 23,000 tons, down 4% month-on-month and 5% year-on-year; exports were 10,000 tons, up 15% month-on-month but down 7% year-on-year. From January to August, consumption amounted to 93,000 tons, down 13% year-on-year. Of this, domestic production was 176,000 tons, down 5% year-on-year; exports were 88,000 tons, up 8% year-on-year. Positive electrode and hexafluoride: In August, production was 305,000 tons (iron-lithium 215,000 + ternary 58,000 + cobalt-lithium 9.4 + manganese-lithium 9.2 + hexafluoride 11), up 7.8% month-on-month and 31% year-on-year. Of this, iron-lithium production was 215,000 tons, up 8.5% month-on-month and 43% year-on-year. From January to August, production was 2,058,000 tons, up 46% year-on-year. Of this, iron-lithium production was 1,430,000 tons, up 65% year-on-year. In September, positive electrode production will peak, and it will gradually weaken in October. Lithium supply and demand: In August, there was a surplus of 4,000 tons of lithium, with a significant reduction in surplus. Supply was 90,000 tons, down 11.8% month-on-month; demand was 86,000 tons, up 6.4% month-on-month. From January to August, there was a surplus of 61,000 tons, with supply at 653,000 tons, up 41% year-on-year, and demand at 591,000 tons, up 36% year-on-year. Lithium price: In August, due to strong industry expectations for inventory replenishment in the peak season, although lithium prices had fallen significantly before, upstream production cuts fell short of expectations. In the second half of the month, prices began to rebound with good production and improved macro sentiment. In September, when positive electrode production is at its peak, supply disruptions in the upstream sector will lead to strong but limited price fluctuations. As production weakens gradually into October, lithium prices will fluctuate weakly. Investment advice: The surplus situation in 2024 has not changed, and with stronger expectations of surplus in 2025 and beyond, it is difficult for lithium prices to rebound significantly, and further drops in prices are necessary to rebalance supply and demand. The sector is currently at the bottom of the cycle, with a cautious outlook on lithium prices and stocks. Attention should be paid to opportunities on the left side. Recommended stocks include Qinghai Salt Lake Industry (000792.SZ), Zangge Mining (000408.SZ), Sinomine Resource Group (002738.SZ), and Yongxing Special Materials Technology (002756.SZ) among others. Risk warning: Electric vehicle demand remains lower than expected, and progress in resource projects exceeds expectations.