Core Viewpoint - The rapid decline in lithium salt prices is seen as a necessary phase for market clearing, with significant implications for upstream mining companies as operational pressures increase [1] Supply - The cost of lithium mining has decreased significantly, leading to a drop in Australian lithium prices, which fell to $743 per ton, a 9% decrease since April [1] - Some Australian mines reported substantial reductions in production costs, with Marion lithium mine's Q1 FOB cost dropping to 708 AUD/ton from 1076 AUD/ton in the second half of 2024 [1] - The overall cost reduction in lithium mining is expected to continue, but the survival space for Australian mines is shrinking due to lower lithium prices [1] Inventory - As of April 30, China's lithium carbonate inventory reached 96,000 tons, the highest level since 2021, indicating a supply surplus in the market [2] - The inventory held by smelters and downstream sectors also reached record highs, with smelters holding 51,000 tons and downstream holding 45,000 tons [2] Production - The rapid decline in lithium salt prices has led to a cost inversion for lithium salt refining companies, with production cash costs exceeding market prices [3] - In April, China's lithium carbonate production fell to 74,000 tons, a 7% decrease month-on-month, while lithium hydroxide production decreased by 1% to 25,000 tons [3] - The reduction in production is expected to intensify as the cost inversion deepens, particularly affecting higher-cost mining operations [3] Demand - Demand for lithium salts is primarily driven by the electric vehicle and energy storage battery markets, with a 42% year-on-year increase in China's new energy vehicle wholesale sales in the first four months of 2025 [4] - Global energy storage installations are projected to grow by 36% in 2025, reaching 216 GWh [4] - Despite some preemptive inventory accumulation due to tariff expectations, the overall growth rate for lithium salt demand remains robust and is expected to outpace supply growth [4]