Core Insights - Chevron Corporation's subsidiary, Chevron U.S.A. Inc., has acquired approximately 125,000 net acres in the Smackover Formation, marking a significant step towards establishing a domestic lithium business essential for the electrification era [1][9][10] - The acquisition includes assets from TerraVolta Resources and East Texas Natural Resources, providing Chevron with direct access to high-lithium-content brines in a rapidly growing domestic market [2][10] - This strategic move reflects Chevron's long-term commitment to energy diversification and securing critical mineral reserves vital for U.S. energy security [3][11] Strategic Acquisition - Chevron's acquisition targets include substantial acreage from TerraVolta Resources and ETNR, enhancing its competitive edge in the lithium market [2][10] - The Smackover Formation is recognized for its high lithium content and favorable geological properties, making it a cost-effective source for lithium extraction [4][5] Extraction Technology - Chevron plans to utilize Direct Lithium Extraction (DLE) technology, which allows for a more efficient and environmentally friendly lithium recovery process compared to traditional methods [6][7] - DLE technology minimizes land use and water consumption while significantly shortening production timelines, aligning with Chevron's sustainability goals [6][7] Domestic Supply Chain - The move into lithium supports a national agenda to strengthen the domestic supply of critical minerals, reducing reliance on imports from unstable regions [10][11] - By establishing a domestic lithium value chain, Chevron enhances national energy security and contributes to a self-sustaining energy ecosystem [11][12] New Energies Strategy - This acquisition is a cornerstone of Chevron's New Energies strategy, focusing on low-carbon technologies and critical minerals like lithium [12][13] - Chevron aims to transition from pilot operations to full-scale commercial production, leveraging its strengths in resource development and infrastructure scalability [13][17] Future Outlook - Chevron will assess and develop the lithium potential of the Smackover acreage, including resource assessment and pilot testing of DLE systems [16][17] - The company aims to establish a vertically integrated lithium value chain, from extraction to delivery of battery-grade lithium products [17][18] Energy Transition - Chevron's entry into the lithium market signifies its commitment to adapting to the changing energy landscape, focusing on clean energy solutions [15][20] - The strategic shift reflects an understanding of the rising demand for lithium in electric vehicles and energy storage systems, supporting global sustainability goals [15][20]

USA | Chemicals Equity Research June 12, 2025 Lithium Value Chain Survey: Soft Conditions Likely Spill Into Q3 Our survey of lithium converters (90% of sales in China) and battery material producers (62%) suggests a mixed picture: softness in prices accelerates into Q3; battery volumes are up YoY, in contrast to soft converter volumes and weak sales expectations. Battery producers appear skeptical of order books. Inventories are weak, with converters flagging the need for a restock. The debate shifts to whe ...

Investment Rating - The report reiterates a positive outlook on lithium prices, suggesting that the near-term trough has been reached with higher upside risks than downside risks [1][2]. Core Insights - Lithium prices have stabilized and slightly rebounded by 1% after a significant decline, with a quarter-to-date average selling price (ASP) down by 13% quarter-over-quarter [1]. - The report highlights that many lithium producers are currently operating at a loss, indicating potential offline maintenance or production suspension in the near future [1]. - Zimbabwe plans to ban the export of lithium concentrates starting in 2027, which is expected to positively impact long-term supply and demand dynamics by encouraging local processing [1]. Production and Inventory Summary - As of June 12, 2025, the ASP for lithium carbonate (Li2CO3) and lithium hydroxide (LiOH) is reported at Rmb60.7k/ton and Rmb65.7k/ton, respectively, showing slight increases from the previous week [2]. - China's Li2CO3 production increased by 4% week-over-week to 18,127 tons, with contributions from various sources: brine (+2%), lepidolite (+4%), spodumene (+5%), and recycled materials (-1%) [2]. - Total inventory of Li2CO3 reached 133,549 tons, reflecting a 1% increase week-over-week, with downstream players' inventory decreasing by 1% to 40,686 tons [2].

Group 1 - The author has a background in private credit and commercial real estate (CRE) mezzanine financing, indicating expertise in financial analysis and investment strategies [1] - The author has collaborated with prominent CRE developers, suggesting a strong network and industry knowledge that could influence investment decisions [1] Group 2 - The article does not provide specific investment recommendations or financial advice, emphasizing the author's personal opinions and research [2][3][4] - There is no indication of any current stock or derivative positions held by the author, which may suggest an unbiased perspective in the analysis presented [2]

Investment Rating - The investment rating for the lithium sector has been adjusted to a pecking order of steel > aluminum > lithium > copper > gold > battery > thermal coal > cement [1] Core Insights - The national "trade-in" subsidy for new energy vehicles (NEVs) has been suspended in some provinces earlier than expected, which may exert downward pressure on NEV demand, but the impact is estimated to be limited due to OEMs offering price discounts and diminishing marginal impact of subsidies [1] - Supply side dynamics are critical, with expectations of more supply cuts for lithium compounds sourced from spodumene and lepidolite in the next three months, as current prices are testing the cost curve for most lithium producers [1] - The market is expected to experience lingering pressure over the next 12 months due to significant oversupply this year [1] Summary by Sections Lithium Market Overview - As of June 5, 2025, the average selling prices (ASP) for lithium carbonate (Li2CO3) and lithium hydroxide (LiOH) are Rmb60.2k/t and Rmb62.3k/t respectively, showing a decline from the previous week [2] - China's Li2CO3 production increased by 5% week-over-week to 17,471 tons, with production from brine, lepidolite, and spodumene showing varied changes [2] - Total inventory of Li2CO3 reached 132,432 tons, reflecting a 1% increase week-over-week, with downstream players' inventory decreasing slightly [2] Company Valuations - Aluminum Corporation of China (Chalco) has a target price of HK$7.60 per share based on a price-to-book (P/B) ratio of 1.59x for 2025E, reflecting stronger than historical average returns due to higher aluminum margins [18] - Tianqi Lithium's A-share target price is set at Rmb26.26 per share based on a P/B multiple of 1.0x for 2025E, which is approximately 1.2x standard deviation below the historical average [22] - The target price for Tianqi Lithium's H-shares is HK$23.0, applying a 30% discount to the A-share target P/B, consistent with historical averages [24]

Investment Rating - The report maintains a positive outlook on cement, copper, and incrementally positive on steel and aluminium, while holding a negative view on coal and lithium [1][9]. Core Insights - Earnings estimates for China commodities have been refreshed, reflecting mark-to-market price changes for 1H25, with target price changes ranging from -13% to +12% [1][9]. - The report highlights a positive outlook for hog pricing/margin in 2H25E due to improved supply discipline [1][9]. Summary by Sector Steel - Earnings forecasts for Baosteel and Angang have been revised up by 1-4% for 2025E, while the loss-making forecast for Maanshan has been cut by 11% [10]. - Maintain Buy on Baosteel with a new target price of Rmb8.8/sh [10]. Coal - The thermal coal market is expected to remain balanced in 2025E, with a decline in demand driven by renewable energy expansion [11]. - Earnings forecasts for Shenhua, Chinacoal, and Yankuang have been cut by 2-11% for 2025E and 10-27% for 2026-27E [12]. Cement - Unit gross profit forecasts for cement have been revised down by Rmb2-6/t for 2025E, but a positive view is maintained for 2H25E due to supply discipline [13]. - Earnings estimates for CNBM, WCC, BBMG-H/A, Conch-H/A, and CRBMT have been cut by 6% to 18% for 2025E [14]. Aluminum - Earnings estimates for Hongqiao have been revised up by 5-27% for 2025-27E, reflecting higher industry spread forecasts [17]. - Maintain Neutral on Hongqiao with a target price of HK$12.5/sh [17]. Copper - The benchmark copper price forecast has been revised to an average of US$4.20/lb in 2025E and US$4.61/lb in 2026E [18]. - Earnings estimates for CMOC-H/A, JXC-H/A, and MMG have been cut by 1-18% for 2025-26E [18]. Lithium - Earnings estimates for Ganfeng, Tianqi, and Yongxing have been cut by 3-4% for 2025E due to lower lithium prices [20]. - Yongxing's 2027E earnings have been cut by 37% based on flat lithium price forecasts [20]. Paper - Earnings forecasts for ND Paper have been revised up by 3-4%, while Sunpaper's earnings have been cut by 3% [22].

Summary of Key Points from the Conference Call Industry Overview - **Industry Focus**: Basic Materials, specifically gold, copper, aluminum, steel, and lithium sectors [2][3][6][7] Core Insights 1. **Gold Market**: - Consensus remains positive on gold, with potential prices reaching up to $6,000 [2][3] - Central bank buying continues to support gold prices, with minimal earnings impact from recent seismic activity at Kamoa mine estimated at less than 5% [3] 2. **Copper Supply**: - A shortage in copper concentrate is expected to persist, with supply increases projected between 100,000 to 1 million tons in 2025, insufficient to meet demand [6][8] - High operating costs at mining companies necessitate higher copper prices to incentivize new supply [6] 3. **Aluminum Sector**: - Aluminum margins remain healthy, with alumina prices stabilizing around Rmb3,000 per ton [2][6] - Hongqiao has relocated aluminum capacity to Yunnan, with plans for further expansion [7] 4. **Steel Industry**: - Weak sentiment in the steel market continues, with expectations of a crude steel production cut of 50 million tons to address supply-demand pressures [7] - Trade tensions and tariffs have negatively impacted steel exports, although some companies are exploring new markets [7] 5. **Lithium Market**: - The lithium market faces oversupply issues, with prices expected to decline unless production cuts occur [6][8] - Ganfeng anticipates a short-term drop in lithium prices due to tariff concerns and reduced costs for Australian miners [8] Additional Important Insights - **Zijin Mining**: - Zijin is optimistic about gold prices reaching $5,000 by 2026, driven by demand from electrification and power grid needs [7] - The company plans to maintain high capital expenditures to meet growth targets by 2028 [7] - **CMOC**: - CMOC's profits are closely tied to market price volatility, with a DRC cobalt export policy update expected soon [8] - The company is facing pressure on production costs due to higher sulfur costs and taxes [8] - **Market Sentiment**: - Overall market sentiment remains cautious, with trade tensions and macroeconomic factors influencing demand across various sectors [6][7][8] Conclusion The conference call highlighted a mixed outlook across the basic materials sector, with strong long-term potential for gold and copper, while challenges persist in the steel and lithium markets. Companies are adapting to market conditions through strategic capacity adjustments and exploring new opportunities amidst ongoing trade tensions.

Financial Data and Key Metrics Changes - In Q1 2025, the company achieved the highest first quarter lithium sales volumes in its history, with a 20% year-on-year increase, driven by strong demand from the electric vehicle market in China and Europe [6][8] - Average realized prices for lithium in Q2 2025 are expected to be lower than in Q1 due to recent price declines [7][59] Business Line Data and Key Metrics Changes - Lithium sales volumes increased significantly, while iodine prices reached record averages amid tight supply and steady demand, particularly for X-ray contrast media applications [6][8] - Specialty Plant Nutrition (SPN) sales volumes grew healthily, with an upward trend in prices due to strong demand for potassium chloride and supply disruptions [9] - Potassium business volumes were significantly lower compared to the same period last year as part of a strategy to prioritize high lithium content brines [10] Market Data and Key Metrics Changes - The company maintains a view that global lithium demand will grow by 17% in 2025, with SQM's sales expected to grow by 15% year-on-year, although this forecast remains unchanged amid current market conditions [29][64] - The lithium market is currently oversupplied, with prices under pressure, particularly in China [71][90] Company Strategy and Development Direction - The company is focused on expanding lithium production capacity to 240,000 metric tons of lithium carbonate and 100,000 metric tons of lithium hydroxide [8] - Investment in operational efficiencies and capacity expansions is ongoing, with a commitment to sustainable high-quality growth [11] - The company is confident in its strategy and ability to generate cash flow despite current pricing pressures [17][88] Management's Comments on Operating Environment and Future Outlook - Management believes the current low price environment is unsustainable and expects prices to improve in the future [88][90] - The company is well-prepared to take advantage of market recovery due to its strong position as a low-cost producer [88][90] - There is optimism regarding long-term demand growth, particularly in the electric vehicle sector [64][90] Other Important Information - The company is advancing its seawater pipeline construction to expand iodine production capacity [8] - The dividend policy established a distribution of 30% of net income for 2025, with no interim dividends planned for the first quarter [48] Q&A Session Summary Question: Will operating cash flow be breakeven or positive per metric ton in lithium in Q2? - Management indicated they are far from breakeven costs and expect to be significantly above that in Q2 [14][15] Question: How will lower lithium prices affect capital structure and funding for future projects? - Management stated that the company has a strong balance sheet and cash generation capacity from other business lines, which will not constrain future projects [16][18] Question: What is the status of the Codelco joint venture in Chile? - Management described the situation as "noise" due to election year discussions but confirmed that the transaction is progressing as planned [20][26] Question: Will SQM's lithium sales grow by 15% this year? - Management has not updated the annual volume forecast but expects similar or slightly lower volumes in Q2 compared to Q1 [29] Question: How is SQM handling pricing dynamics in China? - Management noted that pricing mechanisms with customers are confidential and cannot provide specifics [36] Question: What is the outlook for Mt. Holland production? - Management confirmed that Mt. Holland is cash positive and ramping up as planned, despite facing higher costs during the ramp-up phase [84][97] Question: What is the company's dividend policy? - The company will distribute 30% of its net income for 2025, with no interim dividends planned for the first quarter [48]

Investment Rating - The report upgrades Emerging Market (EM) equities to Overweight (OW) while maintaining a cautious stance on the energy sector [4][7]. Core Insights - Nippon Steel plans to invest an additional $14 billion in U.S. Steel, with $11 billion allocated for infrastructure through 2028, raising concerns about financial health due to increased debt levels [7][10]. - Rio Tinto has formed a joint venture with Codelco to develop a lithium project in Chile, which is expected to expand its lithium strategy without impacting earnings forecasts until 2029 [6][10]. - Hindalco's upcoming report is anticipated to focus on EBITDA per tonne, with expectations of a 6% growth in Q4 compared to Q3, driven by alumina expansion [9][10]. Summary by Sections Nippon Steel - Plans to invest $14 billion in U.S. Steel, including $4 billion for a new steel mill, contingent on regulatory approval [7]. - Concerns about financial health as debt-to-equity ratio could rise to 1.1x if the deal is fully debt-financed [7]. Rio Tinto - Joint venture with Codelco for lithium project in Salar de Maricunga, with initial funding of $350 million and potential construction costs of $500 million [6][10]. - Current lithium output forecast to grow from 75,000 tons per annum in 2024 to 460,000 tons per annum by 2029-2033 [6][10]. Hindalco - Focus on EBITDA per tonne in the upcoming report, with a forecasted 6% growth in Q4 [9][10]. - Concerns about alumina exposure, but analysis suggests limited impact on share prices [10].

Report Industry Investment Rating - Not provided Core View of the Report - The supply of domestic lithium carbonate in May is expected to be loose, and the price of lithium carbonate is likely to fall rather than rise. It is recommended that investors mainly lay out short positions when the price rebounds. Pay attention to the support level around 30,000 - 63,000 and the resistance level around 68,000 - 73,000/75,000 [5] Summary of Relevant Catalogs 1. Lithium Carbonate Futures Market - **Price and Volume Data**: On May 13, 2025, the closing prices of the near - month, consecutive - one, consecutive - two, and consecutive - three contracts of lithium carbonate futures decreased compared to the previous day. The trading volume of the active contract decreased by 96,901 hands, while the open interest increased by 9,895 hands. The inventory increased by 93 tons [1] - **Spread and Basis Data**: The spreads between different contracts and the basis also changed. For example, the spread between the near - month and consecutive - one contracts decreased by 200 yuan, and the basis (SMM battery - grade lithium carbonate average price - lithium carbonate active contract closing price) increased by 820 yuan [1] 2. Lithium Spot Market - **Lithium Ore and Lithium Compound Prices**: The prices of lithium spodumene concentrate, lithium mica, and various lithium compounds such as lithium carbonate, lithium hydroxide, and hexafluorophosphate showed different degrees of decline or stability on May 13, 2025, compared to the previous day [1] - **Price Difference Data**: The price differences between different grades of lithium compounds also changed. For example, the price difference between battery - grade lithium hydroxide and battery - grade lithium carbonate decreased by 100 yuan [1] 3. Industry News - **Project Construction**: On May 10, 2020, the 2GWh lithium iron phosphate energy - storage battery manufacturing project of Zhejiang Jiaxing Aolifu Photovoltaic Technology Co., Ltd. in Wudalianchi Economic Development Zone, Heilongjiang Province, with an investment of 780 million yuan, is targeted to be put into production by the end of October this year. Tianci Materials is actively promoting local production capacity construction in the United States and Morocco to expand overseas markets for electrolytes and hexafluorophosphate [2] - **Tariff Policy**: On May 10, the China - US joint statement on the economic and trade meeting indicated a general reduction in tariffs on China. The import tariffs on Chinese automotive and non - automotive lithium batteries in the US decreased to 8.1% and about 11% respectively, which is a significant positive for the lithium - battery industry's exports to the US [3] 4. Supply and Demand Analysis - **Supply Side**: The 30,000 - ton wet - process project of Tianqi Lithium's Greenbushes plant may be put into production in October 2025, which may lead to a decline in the price of domestic lithium ore and an increase in production or imports in May. The production of domestic lithium carbonate in May is expected to increase, and the supply is expected to be loose. Some production lines will undergo inspections, and new production capacities are planned to be built [4] - **Demand Side**: The monthly average production cost of lithium iron phosphate with different production processes in China is 11,000 - 13,000 yuan/ton, and the production and inventory in May may increase. The production of some lithium - battery materials such as cobalt - containing compounds may also change due to various factors [4][5]