Flash | 11 Sep 2025 10:34:40 ET │ 9 pages China Battery Materials Lithium into 2nd week of Sep – Lithium in a tug of war among speculations CITI'S TAKE Lithium market extends volatility in last couple of days, testing price level of Rmb70k/t on the speculation of CATL's mine resumption. Our read follows: (1) we do not think the government's underlying purpose is to take out lepidolite from market for years long, but wants to regulate miners to operate in a more compliant way (i.e., proper mine license & res ...

Summary of Key Points from the Conference Call Industry Overview: Lithium Market - **Weekly Production Increase**: Lithium production in China increased by 2% week-over-week (WoW) in the first week of September, with a total output of 19,419 tons of Li2CO3 [1][2] - **Impact of CATL's Suspension**: Despite CATL's operational halt leading to a supply cut of approximately 2,000 tons per week, this was largely offset by a rise in spod-based carbonate output, which regained market share to approximately 64% from 47% in early July [1] - **Spodumene Inventory Growth**: Spodumene inventory at smelters rose to 100,602 LCE tons by the end of August, indicating a significant increase in shipments to China [1] - **Monthly Output Increase**: The monthly output of spod-based carbonate increased by 19% month-over-month (MoM) in August, suggesting a robust supply response to rising lithium prices [1] Price Trends - **Price Decline**: The average selling price (ASP) of lithium continued its downtrend, with Li2CO3 and LiOH quoted at Rmb75,000/ton and Rmb75,900/ton respectively as of September 4, down from Rmb80,000/ton and Rmb77,000/ton on August 28 [2] - **Inventory Levels**: Total inventory of Li2CO3 decreased by 1% WoW to 140,092 tons, with downstream players' inventory increasing by 5%, while smelters' inventory decreased by 9% [2] Additional Insights - **Supply Response to Price Rally**: The increase in spod-based carbonate output and the rise in spodumene inventory suggest that the lithium price rally is incentivizing a supply response from producers [1] - **Market Dynamics**: The dynamics of the lithium market are influenced by both production levels and inventory changes, which are critical for understanding future price movements and supply-demand balance [2] This summary encapsulates the key points discussed in the conference call regarding the lithium market, highlighting production trends, price movements, and inventory levels.

Summary of Key Points from the Conference Call on China Battery Materials Industry Overview - The report focuses on the lithium battery materials industry in China, particularly lithium production and pricing trends as of late August 2025. Core Insights 1. **Lithium Production and Inventory Levels** - Lithium production and inventory levels remain high, showing little week-over-week change. This indicates a stable supply situation in the market [1][2] 2. **Inventory Structure Changes** - There has been a significant shift in inventory structure, with increasing inventory levels moving towards downstream clients, traders, and GFEX. This suggests a potential change in demand dynamics within the supply chain [1] 3. **Spodumene Import Volumes** - July 2025 saw record high spodumene import volumes, the highest since January 2024. Notably, imports from Australia showed the greatest elasticity due to shorter shipping times compared to Africa [1] 4. **Domestic Carbonate Output** - Spodumene-based carbonate accounted for approximately 64% of domestic carbonate output last week, a notable increase from 47% in early July. This shift may impact pricing and production strategies [1] 5. **Price Trends** - The average selling price (ASP) for lithium carbonate (Li2CO3) and lithium hydroxide (LiOH) has shifted downward, with current prices at Rmb80,000/ton and Rmb77,000/ton respectively, compared to Rmb85,200/ton and Rmb77,700/ton the previous week [2] 6. **Production Changes** - China's Li2CO3 production decreased by 1% week-over-week to 19,030 tons. The output from brine and lepidolite decreased by 1% and 6% respectively, while spodumene and recycled lithium saw a 1% increase [2] 7. **Inventory Levels** - Total inventory of Li2CO3 stood at 141,136 tons, remaining stable week-over-week. Inventory levels among downstream players increased by 3%, while smelters saw a 7% decrease [2] Additional Important Points - **Upcoming Catalysts** - The upcoming mine license checks for the remaining seven lepidolite mines post-September 30, 2025, are critical events to monitor, as they may influence supply and pricing in the near term [1] - **ASP Risks** - There is a near-term risk of ASP decline due to the removal of overhang from Yongxing's safety production license, which could lead to increased market supply [1] This summary encapsulates the key findings and insights from the conference call regarding the lithium battery materials industry in China, highlighting production, inventory, pricing trends, and future catalysts.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Lithium Battery Materials - **Key Company**: Contemporary Amperex Technology Co., Ltd. (CATL) Core Insights and Arguments 1. **Production Halt by CATL**: CATL has halted its lithium conversion production as of the week of August 9, 2025, due to the closure of its mine, indicating a potential depletion of its lepidolite inventory. In July 2025, CATL produced approximately 9,000 LCE tons [1] 2. **Increase in Spodumene Production**: In response to CATL's output drop, spodumene-based smelters have ramped up production, with weekly output increasing by 42% to 12,000 LCE tons compared to 8,600 LCE tons in early July 2025 [1] 3. **Spodumene Inventory Growth**: For the first time in 12 months, China's spodumene inventory at smelters showed a significant month-over-month increase in July 2025, suggesting enhanced supply elasticity from spodumene-based carbonate OEM processing [1] 4. **Lithium ASP Trends**: The average selling price (ASP) for lithium carbonate (Li2CO3) and lithium hydroxide (LiOH) has increased, with Li2CO3 quoted at Rmb85,200 per ton and LiOH at Rmb77,700 per ton as of August 21, 2025, compared to Rmb82,000 and Rmb73,000 respectively the previous week [2] 5. **Production Decline**: China's Li2CO3 production decreased by 4% week-over-week to 19,138 tons, with brine and lepidolite outputs down by 7% and 32% respectively, while spodumene and recycled lithium outputs increased by 4% and 5% [2] 6. **Inventory Levels**: Total inventory of Li2CO3 was reported at 141,543 tons, reflecting a 1% decrease week-over-week. Notably, inventory levels for downstream players increased by 7%, while smelters and battery makers saw declines of 6% and 2% respectively [2] Important but Overlooked Content 1. **Upcoming Catalysts**: Key upcoming events to monitor include the renewal of Yongxing Materials' safety production license on September 6, 2025, and the mine license checks for the remaining seven lepidolite mines post-September 30, 2025 [1] 2. **Valuation Metrics for CATL**: CATL's valuation is pegged at HK$425 per share based on a target EV/EBITDA multiple of 16.6x for 2025, which aligns with its historical average since the A-share listing. This implies a P/E ratio of 28.2x for 2025 and 22.4x for 2026 [18][20] 3. **Risks to CATL's Valuation**: Potential risks affecting CATL's stock price include lower-than-expected electric vehicle (EV) demand, increased competition in the EV battery market, and higher raw material costs [19][20] This summary encapsulates the critical insights from the conference call, focusing on the lithium battery materials industry and CATL's operational status, production trends, pricing dynamics, and valuation outlook.

Investment Rating - The investment rating for Tianqi Lithium is set at "Hold" with a target price of HK$23.0 for H-shares and Rmb26.26 for A-shares, reflecting a valuation based on P/B multiples [19][21]. Core Insights - The report indicates a near-term bottom for lithium prices at Rmb60k/t, with expectations of supply discipline to help rebalance the market. However, there are concerns about potential supply resumption if prices rebound to Rmb70k/t [1]. - The report maintains a bullish outlook on lithium in the short term, despite anticipated pressure from oversupply in the next 12 months [1]. - Recent data shows mixed trends in lithium prices, with Li2CO3 and LiOH ASP quoted at Rmb60.6k/t and Rmb58.1k/t respectively, indicating slight fluctuations week-over-week [2]. Summary by Sections Lithium Price Trends - Lithium prices are currently experiencing a mixed trend, with Li2CO3 and LiOH ASP at Rmb60.6k/t and Rmb58.1k/t as of June 26, 2025, compared to Rmb60.5k/t and Rmb59.2k/t the previous week [2]. - The production of Li2CO3 in China increased by 2% week-over-week to 18,767 tons, with varying outputs from different sources [2]. Inventory and Production Insights - Total inventory of Li2CO3 reached 136,837 tons, reflecting a 1% increase week-over-week. Inventory levels for downstream players, smelters, and others also showed increases [2]. - The report highlights ongoing production increases across various lithium sources, with brine and lepidolite outputs up by 2% and 3% respectively [2]. Company Valuation - Tianqi Lithium's H-shares are valued at HK$23.0 based on a 0.70x 2025E P/B multiple, while A-shares are valued at Rmb26.26 based on a 1.0x 2025E P/B [19][21].

Investment Rating - The report does not explicitly provide an investment rating for the lithium industry but indicates a bearish outlook on lithium prices and forecasts [1][2] Core Insights - The lithium market is experiencing a significant surplus, with an estimated surplus of around 6% of total supply for the year [1] - Citi Commodity Team has downgraded their price forecasts for lithium salts and spodumene (SC6) by an average of 13% for CY25, 27% for CY26, and 20% for CY27 [1] - Average selling prices (ASPs) for lithium carbonate (Li2CO3) and lithium hydroxide (LiOH) have shown a downward trend, with current prices at Rmb60.5k/t and Rmb59.2k/t respectively [2] Summary by Sections Market Outlook - The lithium market is building large surpluses, leading to downward pressure on prices [1] - The price for SC6 spodumene has been downgraded to US$600/t from US$700/t [1] Production and Inventory - China's Li2CO3 production increased by 2% week-over-week to 18,462 tons [2] - Total inventory of Li2CO3 reached 134,901 tons, reflecting a 1% increase week-over-week [2] - Inventory levels for downstream players, smelters, and battery makers showed mixed trends, with downstream inventories decreasing by 1% [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]