Haitong: Lithium mines in Australia are stopping production, and a reversal in the lithium industry is on the way.

Haitong releases a research report stating that in November 2024, MIN announced that due to the continuous low lithium spodumene prices, the company will transition the Bald Hill lithium mine to maintenance status starting from the week of November 13th, and cease mining operations starting from November 13th. The company expects the lithium spodumene beneficiation plant to suspend operations in December 2024. The cessation of production at the producing lithium spodumene mines in Australia is one of the significant signs of industry supply rationalization. With current low lithium prices, industry capital expenditure is scarce, and high-cost lithium resources will continue to reduce production and cease operations. With the outlook for the improvement in the prosperity of the downstream new energy vehicles and power battery industries, lithium ore and lithium salt prices are expected to rebound from the bottom. Haitong's main points are as follows: Bald Hill production suspension results in revision of FY25 shipment volume guidance. In November 2024, MIN announced that due to the continuous low lithium spodumene prices, the company will transition the Bald Hill lithium mine to maintenance status starting from the week of November 13th, and cease mining operations starting from November 13th. The company expects the lithium spodumene beneficiation plant to suspend operations in December 2024. The FY25 shipment volume of lithium spodumene from Bald Hill has been revised down from 120-145 thousand dry metric tons to approximately 60 thousand dry metric tons. The company expects to sell the final batch of lithium spodumene in December. The project employs about 300 workers who will be redeployed to other MIN projects in Western Australia. If no other projects are available for allocation, layoffs will be carried out according to procedures. Bald Hill has high costs and faces significant operating pressure. MIN completed the acquisition of the Bald Hill lithium mine in November 2023, and in FY24, the project shipped a total of 67 thousand tons of 6% lithium spodumene, with an FOB cost of $851 per ton. This cost is significantly higher than the FOB costs of the company's other two mature lithium mines - Mt Marion lithium spodumene mine at $498 per ton and Wodgina lithium spodumene mine at $642 per ton. According to Asian Metal, the price of lithium spodumene concentrate on November 13th was $780 per ton, already lower than the project's FY24 cost. Bald Hill lithium resource increases by 168%. MIN announced an update of the Bald Hill lithium mine resource estimate, with the lithium mineral resource reaching 58.1 million tons, with a lithium oxide grade of 0.94%, representing a 168% increase from previous exploration results. The company previously estimated that the project's post-stabilization cost could be reduced to 800-890 Australian dollars per ton (522-581 US dollars per ton). End-of-year sprint, strong demand for new energy vehicles. According to data from the China Association of Automobile Manufacturers cited by SMM, in October, the production and sales of new energy vehicles reached 1.463 million and 1.43 million units, respectively, representing year-on-year increases of 48% and 49.6%, with new energy vehicles accounting for 46.8% of total automobile sales. In terms of power batteries, China's power battery installations reached 59.2 GWh in October, an 8.6% month-on-month increase and a 51.0% year-on-year increase. From January to October, cumulative power battery installations in China reached 405.8 GWh, with a cumulative year-on-year increase of 37.6%. Regarding cathode materials, according to SMM, China's lithium iron phosphate production increased by 4% month-on-month and over 100% year-on-year in October. Production is expected to continue to increase by 7% month-on-month and 145% year-on-year in November. The increasing prosperity of downstream lithium-ion battery demand will drive stronger demand for lithium salts. Risk warning: New energy vehicle demand growth falls short of expectations, and production resumption of suspended projects after a rebound in lithium carbonate prices.