Guotai Haitong: Maintains "buy" rating on lithium cobalt industry, expectations of clearing inventory to drive lithium prices up.

Guotai Haitong released a research report stating that it maintains a buy rating for the lithium-cobalt industry. The price of lithium is currently relatively strong and difficult to fall, with an upward trend expected until mid-November; while the price of cobalt is expected to continue rising unilaterally until the end of the year. The bank believes that strong demand will provide sufficient support for the price of lithium; however, with a large number of supply projects both domestically and internationally being put into operation in the second half of the year, the price of lithium may face some pressure after the end of November. According to SMM data, the price of battery-grade lithium carbonate last week was 74,500-76,330 yuan/ton, with an average increase of 2.79% from the previous week. The price of battery-grade lithium hydroxide (Coarse particles) was 72,100-75,300 yuan/ton, with an average increase of 0.82% from the previous week. The main points of Guotai Haitong's report are as follows: Economic outlook: Maintaining a buy rating for the lithium-cobalt industry. Lithium sector: Demand continues to exhibit seasonal characteristics, pushing prices higher with inventory reduction. 1) The weekly price of lithium flake 2511 contract in Wuxi rose by 1.32% to 76,500 yuan/ton; the 2511 contract in the Futures Exchange rose by 4.25% to 78,900 yuan/ton; 2) Lithium concentrate: the price of lithium concentrate on the Shanghai Nonferrous Network was $881 per ton, an increase of $35 per ton compared to the previous week. Overseas ore pricing sentiment remains stable, with strong downstream inquiry and purchasing intentions, pushing ore prices higher. Cobalt sector: Downstream demand for cobalt for electric vehicles is weak, with prices first rising and then falling due to inventory pressure; while cobalt salts are in a supply-demand game. Many cobalt companies are extending downstream to new energy, forming an integrated cost advantage of cobalt-nickel-precursor-three elements, strengthening competitive barriers. Strong demand support and inventory reduction expectations are driving the upward trend in lithium prices. During the week, the spot price of lithium carbonate steadily rose, while futures fluctuated within a range; on the supply side, new production lines were put into operation at the lithium spodumene and salt lake ends, steadily increasing market supply, and lithium salt plant operating rates remained high. On the demand side, downstream performance remains strong, with rapid growth in power batteries, strong supply and demand in the energy storage market, and continuous increase in the operating rates of downstream material factories providing support for spot transactions. According to SMM, China's lithium carbonate production increased by 2.43% on a weekly basis and inventory decreased by 1.73% on a weekly basis. Inventory depletion has continued for more than two months, reflecting a significant improvement in the supply and demand pattern in this season, and a clear positive industrial feedback. On the demand side, from October 1-19, Guxin Energy Corporation sold 632,000 passenger vehicles, a year-on-year increase of 5%, a month-on-month increase of 2%, and a new energy retail penetration rate of 56.1%, with improvement in growth rate and penetration rate compared to the previous week, continuing the seasonal characteristics. On the supply side, low-cost production capacity at home and abroad is still being released, production pressure cannot be ignored. The bank believes that strong demand will provide sufficient support for the price of lithium, but with a large number of supply projects being put into operation and climbing production in the second half of the year, the price of lithium may face some pressure after the end of November. According to SMM data, the price of battery-grade lithium carbonate last week was 74,500-76,330 yuan/ton, with an average increase of 2.79% from the previous week. The price of battery-grade lithium hydroxide (Coarse particles) was 72,100-75,300 yuan/ton, with an average increase of 0.82% from the previous week. Market trading is insufficient to follow up, slowing the upward trend in cobalt salt prices. In terms of cobalt intermediates, as the peak demand season approaches, miners are gradually releasing some cobalt intermediate stocks outside of the Congo, but current supply levels still cannot fully meet domestic market demand. Mainstream mines and traders, under optimistic expectations, are still holding back sales. For electric cobalt, domestic demand growth is limited, actual consumption downstream is not much, and demand weakens in the fourth quarter; the gap caused by reduced production by smelters is relatively small, inventory digestion is slow, combined with some private sector inventory inflows, overall inventory does not decrease, and the price of electric cobalt rises and then falls back after the rise. As for cobalt salts, downstream acceptance of current prices is low, mainly to digest inventory and supplement necessary materials; prices stabilize after rising. According to SMM data, last week's electrolytic cobalt price was 400,000-415,000 yuan/ton, with an average increase of 6.96% from the previous week. The average price of lithium iron phosphate rises weekly, as does the average price of ternary materials. According to SMM data, last week the price of lithium iron phosphate was 33,900-35,400 yuan/ton, with an average increase of 2.50% from the previous week. The price of ternary materials 622 was 127,000-131,900 yuan/ton, with an average increase of 0.90% from the previous week. Risk warning: The growth rate of new energy vehicles may not meet expectations.