Chinese lithium carbonate market to see limited price decline in H2 2020

Asian Metal: Thanks for taking our interview. Would you please give a brief introduction on your company first?

Mr. Ke: In March 2003, Qinghai CITIC Guo'an Technology Development Co., Ltd. was set up in Golmud Kunlun Economic Development Zone, Qinghai province with a registration capital of RMB2.2 billion (USD311 million). On May 26, 2017, it set up a fully owned subsidiary Qinghai CITIC Guo'an Lithium Development Co., Ltd. Focusing upon research, production and selling of related mineral resources including potassium, lithium, boron and magnesium at the East and West Taijinai'er Salt Lakes, Qaidam Basin, the subsidiary company is a high-tech salt lake chemistry enterprise integrating resources development, technology research, and development of new materials and new products. It has mining licenses on West Taijinai'er Salt Lake, one of the first 40 demonstration bases approved by the Chinese Ministry of Natural Resources and Ministry of Finance on comprehensive utilization of mineral resources, and also a national pilot base for green mining appointed by the Ministry of Natural Resources. Our mining licenses cover an area of 493.29 square kilometers with bountiful reserves of minerals and metals including lithium, potassium, boron, magnesium and so on. The Lake has a measured reserve of around 2.83 million tons of lithium chloride.

Asian Metal: Would you please give an introduction on your main businesses and projects?

Mr. Ke: We now have production capacities of 500,000tpa of potash fertilizer, 10,000tpa of lithium carbonate and 10,000tpa of refined boric acid as well as a side-product production capacity of 50,000tpa of magnesium oxide.

Asian Metal: The lithium carbonate market sees fierce competition among upstream suppliers now. What are your advantages and characteristics in raw material supply and production process?

Mr. Ke: Regarding resources, we now have mining licenses covering an area of 493.29 square kilometers of the West Taijinai'er Salt Lake which has bountiful reserves of potassium, lithium, magnesium and boron. The 2018 mineral resources estimate report showed that the Lake has a reserve of about 2.63 million tons of lithium chloride. Our mining conditions are excellent and enough to ensure development of our company. Meanwhile, we have sufficient technical advantages. We have a number of patented technologies on salt lake resources mining, and also have complete capacities to carry out steady production of battery grade lithium carbonate. Technical indicators of our lithium carbonate products all exceed national standards and are far higher than those of other brine lithium enterprises in China, quite close to or even exceeding Albemarle products. Our products have been used in renowned brands such as LG, Samsung, Tesla and BYD.

Asian Metal: The COVID-19 breaking out in early 2020 dented both the Chinese and other economies. Has your company undergone any difficulties in production and selling resulting from the epidemic? And have you recovered from it or not?

Mr. Ke: During this Spring Festival holiday we maintained normal lithium carbonate production, while after the epidemic broke out, we adjusted our work mode, suspended the shuttle bus between Golmud city and West Taijinai'er Lake plant, and stopped inter-personal travelling, so basically speaking our production has not been affected by the epidemic and has been in normal status. But affected by the COVID-19, the logistics system wound down, and we failed to deliver our products in early March. Thanks to frequent negotiations with related parties, we were able to make deliveries as usual after late March, and since then our lithium carbonate production and selling have been both in normal status.

Asian Metal: The lithium market in 2020 witnesses both notable decreases in lithium prices and also an industrial reshuffling. What is your development plan for the future?

Mr. Ke: We will make full use of our advantages in resources, technology, product quality and costs, as well as opportunities resulting from Chinese government's strategic drive to promote development of the new energy vehicle industry. In addition to maintaining our existing production size and quality in battery grade lithium carbonate, we will try to increase output of this product. By keeping optimizing techniques and making better use of our resources advantages, we aim to achieve annual production capacities of 30,000tpa of high-quality battery grade lithium chemicals, 500,000tpa of potash fertilizer, 10,000tpa of refined boric acid and 10,000tpa of high-quality magnesium chemical in the coming three years. We will try to achieve coordinated development of salt lake resources and therefore make our contribution to development of Qinghai lithium industry and China's new energy and new material industry.

Asian Metal: Cathode material producers have seen their sales just recovering slowly after this Spring Festival holiday, which expedites the downward movement in lithium prices. How do you think of the lithium carbonate market in 2020?

Mr. Ke: Since June 2019 when the new and lower subsidy policy came into force, the lithium chemical market has been sluggish with both demand and price dropping. In Q1 2020 the NEV market still saw limited transactions, and was further affected by suspension in goods transportation owing to the COVID-19. Li-battery material producers in China successively suspended production or postponed resumption time, leading to weakening demand for lithium carbonate. On the other hand, owing to earlier large inflows of capital into the lithium carbonate market, some lithium carbonate projects went into operation successively this year, and the market saw further expanding gap between supply and demand. Accordingly lithium carbonate prices kept dropping. But current lithium carbonate prices are already at low levels and there is quite limited room for them to go down further; meanwhile, the epidemic is gradually under control. So I believe that lithium carbonate prices would hover at a low level and market transactions would increase to some extent in the future.

Asian Metal: Over the recent two years the market has been in an argument about what will be a proper market share of ternary material and LFP respectively in the future, and this argument will directly affect the demand for lithium carbonate and lithium hydroxide in the future. What are your opinions?

Mr. Ke: LFP has high safety performance and longer service life, and its raw material costs are low but it can be used in a wide range of working temperature. With LFP production technology enhancing, notable improvements have been achieved in the performance of the material, and it will be more widely used in producing medium- and low-end Li-batteries in the future. As for ternary material, it has high energy density and good recycling property, but poorer safety performance and high production costs. In the future ternary material will be mainly used in producing high- and medium-end Li-batteries, and development of high-nickel ternary material will boost demand for lithium hydroxide; as a result, the lithium hydroxide market will become the front field where more lithium chemical producers will be eager to invest and compete against each other.

Asian Metal: Thanks again for taking this interview. Hope your company better and better!