Founder: Rapid decline in lithium salt prices propels the industry towards supply-side clearance.

Founder released a research report stating that the market-driven clearing of supply always needs to be achieved through price declines. Recently, lithium salt prices have rapidly declined, with the bank believing it is a necessary stage for industry acceleration of clearing. With the downward pressure on Australian mineral prices, operational pressure will be transmitted to the most upstream mining enterprises. Currently, several companies in the lithium mining sector have a PB of less than 1.5 times, with a few companies dropping to around 1 time, and the industry as a whole is within the bottom investment range. Keep an eye on Tianqi Lithium Corporation, Ganfeng Lithium Group, Sinomine Resource Group, Yongxing Special Materials Technology. Event: Recently, lithium carbonate prices have rapidly declined. As of May 8, the main contract 2507 for lithium carbonate on the Guaqi Exchange closed at 64,280 yuan per ton, a 14% decline since April. The spot price is 65,250 yuan per ton, a 12% decline since April. Founder's main points are as follows: Costs: Some Australian mineral costs for Q1 25 have significantly dropped, leading to a decline in Australian mineral prices Recently, Australian minerals have successively disclosed their production and operating conditions for Q1 25. The Q1 FOB cost of Marion lithium mine is 708 Australian dollars/ton, a significant decrease from the second half of 24 (1076 Australian dollars/ton). The Q1 FOB cost of Wodgina lithium mine is 775 Australian dollars/ton, a significant decrease from the second half of 24 (1013 Australian dollars/ton). As a result, Australian mineral prices have dropped to 743 US dollars/ton, a 9% decrease since April. The bank believes that the cost reduction has certain short-term factors, mainly due to the higher grade of the original ore selected in the current mining pit, and MIN has not reduced the cost guidance for the full year of the two mines in fiscal year 25. At the same time, other Australian minerals have not shown the same degree of cost reduction, with Greenbushes lithium mine's cash cost in Q1 25 at 341 Australian dollars/ton, a 5% increase; Pilbara's lithium mine's Q1 FOB cost at 685 Australian dollars/ton, an increase of 10%. The bank believes that the left shift in lithium mine costs is inevitable, but the survival space left for Australian minerals by the current ore price is shrinking. Inventory: Lithium salt inventory is accumulating, downstream inventory is at a high level As of April 30, SMM statistics show that China's lithium carbonate inventory has reached 96,000 tons, the highest level since 21. Smelters hold 51,000 tons, while downstream holds 45,000 tons, also the highest level since 21. Since February 25, China's lithium carbonate inventory has continued to rise, reflecting a relatively loose supply in the spot market. Supply: Cost inversion, lithium salt production shows a downward trend Due to the rapid decline in lithium salt prices after April, lithium salt smelting enterprises have fallen into a cost inversion state. For example, the current production cash cost of imported spodumene raw materials is as high as 70,000 yuan, already lower than the lithium salt market price. China's lithium carbonate production in April was 74,000 tons, a 7% decrease from the previous year; lithium hydroxide production was 25,000 tons, a 1% decrease. The bank believes that as the degree of inversion deepens, the pressure for lithium salt companies to reduce production becomes more severe. The impact of low lithium prices on the mining end is also fermenting. For example, in Africa where costs are relatively high, China imported 209,000 tons of lithium concentrate from Zimbabwe in Q1, a decrease of 21% compared to the previous period, and a 38% decrease from the peak in 24. Before April, Australian mineral prices were relatively strong, with Australian lithium ore production in Q1 at 940,000 tons, a 9% decrease from the previous period. With the decline in lithium concentrate prices in Q2, the possibility of reduced production by lithium mining companies may further increase. Demand: Expected disturbances, steady growth in reality Lithium salt demand mainly focuses on the electric vehicle and energy storage battery markets. According to the China Association of Automobile Manufacturers, the wholesale sales volume of Shanxi Guoxin Energy Corporation in Q1 25 was 4 million vehicles, a 42% increase year-on-year; the expected full-year wholesale sales volume is expected to reach 15.7 million vehicles, an increase of 28%. In terms of energy storage batteries, according to Jiubang Consulting, under neutral expectations, the global energy storage new installed capacity is expected to reach 216 GWh by 2025, a 36% increase year-on-year. The bank believes that under the expectation of early tariffs on the U.S., the industry chain has to some extent anticipated demand, and the disturbance caused by the U.S. tariffs in April cannot be ignored. However, it is important to note that the downstream growth of lithium salt in the electric vehicle and energy storage battery markets in 25 is still significant, exceeding the growth rate of the supply side. The bank believes that the overall surplus in the lithium salt industry is narrowing in 25. Risk Warning: New energy vehicle demand growth falls short of expectations; lithium battery energy storage demand growth falls short of expectations; accelerated development of lithium mineral resources.