Investment Rating - The investment rating for the industry is "Positive" [3] Core Insights - The industry is experiencing a decline in profitability, with the main material chain under significant pressure, while the auxiliary material chain remains relatively stable [7][16] - The performance of the main material chain has seen a year-on-year revenue decrease of 31% and 26% for 24Q4 and 25Q1, respectively, with net profit losses continuing to expand [7] - The auxiliary material chain has shown a slight revenue decline of 4% and a growth of 4% for the same periods, with net profit increasing by 10% in 25Q1 [7] - The industry is expected to enter a bottoming phase, with potential price rebounds anticipated in 25H2 due to supply contractions [23][25] Summary by Sections Industry Performance - The main material chain is facing ongoing losses due to continuous price declines, while the auxiliary material chain is performing more steadily, with some price increases providing operational flexibility [7][16] - The overall industry is experiencing a slowdown in demand growth, with limited bright spots on the demand side [23] Financial Metrics - The main material chain's gross margin and net margin have shown a declining trend, while the auxiliary material chain's margins remain relatively stable [7] - The industry's capital expenditures are decreasing, returning to levels seen in early 2022, indicating a slowdown in corporate expansion [16][20] Supply and Demand Dynamics - The industry is expected to see a significant supply contraction in 25H2, particularly in the battery and component segments, which are facing high debt ratios [20][25] - The demand outlook for 25H2 is expected to be subdued, with potential low points in production schedules during June and July [23][25]

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]