At the beginning of 2022, lithium battery-related companies accelerated the layout of upstream resources. On January 13, it was reported that Chile had awarded two of the five lithium mining contracts to BYD Chile and a local company. BYD offered US$61 million for a lithium production quota of 80,000 tons. BYD confirmed the news to the “Securities Daily” reporter.
It’s not just BYD that is targeting lithium resources. On the evening of January 12, Yiwei Lithium Energy announced that it will bid 144 million yuan to obtain a 35.29% stake in Xinghua Lithium Salt, and another 13.71% stake in Xinghua Lithium Salt will be transferred for 56.0158 million yuan, which will directly hold Xinghua in total. 49% stake in Lithium Salt.
In this regard, Bai Wenxi, chief economist of IPG China, said in an interview with a reporter from “Securities Daily” that the rapid development of the new energy industry has promoted the rapidly rising demand for lithium resources, and mastering lithium resources has become a strategic option for lithium battery companies. The accelerated deployment of upstream resources by lithium battery-related companies such as BYD and Yiwei Lithium Energy is also a reflection of this strategy.
BYD wins bid for lithium ore contract
80,000 tons of lithium production quota granted
According to public information, in October 2021, Chile announced a quota of five 80,000 tons of lithium exploration and production contracts to domestic and overseas companies, totaling 400,000 tons. The winning bidder will receive seven years of exploration and development projects and 20 years of production.
On January 12, 2022, the official website of the Chilean Ministry of Mines announced that it chose to deliver two of the five quotas offered to BYD Chile and another local company, both of which were awarded 80,000 tons of lithium production quotas, of which BYD Chile bid $61 million. The two offers were significantly higher than other offers received, and the total quota granted was 160,000 tonnes of lithium, or about 1.8% of Chile’s known lithium reserves, the announcement said.
Bai Wenxi said that as a global benchmarking enterprise for lithium battery production, BYD’s demand for lithium resources is self-evident. Winning the bid for Chile’s lithium ore can strengthen its control over upstream resources and strengthen its supply chain, which will greatly impact its automotive business. In addition to effectively controlling costs, it can also improve the stability and security of the industrial chain.
Qi Haishen, president of Beijing Teyi Sunshine New Energy, analyzed the “Securities Daily” reporter that as long as the cost of purchasing lithium ore does not exceed the normal operating range, from the perspective of the long-term development of the industry and the company, the price is not so important.
From the perspective of BYD’s several major businesses, whether it is new energy vehicles, intelligent product development, production and assembly, rechargeable batteries, etc., are inseparable from lithium resources. In fact, compared with traditional car companies, BYD, who was born in batteries, realized the importance of laying out the upstream supply chain earlier.
In 2010, BYD took a stake in Zabuye Salt Lake, the largest salt lake lithium mine in China, and invested 18% of the shares of Tibet Zabuye Lithium Industry, making a certain strategic reserve in upstream raw materials. In 2017, BYD announced that its research and development broke through the technology of extracting lithium from salt lakes, and based on this, it jointly developed Qinghai Salt Lake lithium resources with Salt Lake Co., Ltd., and planned to build a 30,000-ton lithium carbonate project. The follow-up progress was stagnant due to the suspension of the listing of Salt Lake Co., Ltd.
Some analysts believe that BYD’s winning the bid for the Chilean lithium mine will help the company to fully secure upstream resources and ultimately help achieve its strategic goals for the new energy industry.
“After winning the bid for the Chilean lithium mine, BYD takes new energy vehicle products as the core driving force to build a strategic development plan for the integration of the vertical industry chain of ‘lithium mine-three power (battery, motor and electronic control)-automobile’. Form.” Qi Haishen said.
Prices keep going up
Lithium battery companies are busy grabbing “lithium”
It is not just BYD that is marching into upstream resources. On the evening of January 12, Yiwei Lithium Energy announced that the company acquired about 35.29% equity of Xinghua Lithium Salt with a bid of 144 million yuan, and acquired a 13.71% equity of Xinghua Lithium Salt for 56.0158 million yuan, totaling about 200 million yuan. acquired a 49% stake in Xinghua Lithium Salt.
According to public reports, the annual output of 10,000 tons of high-purity lithium chloride and 25,000 tons of boric acid projects implemented by Xinghua Lithium Salt has a total investment of about 647 million yuan. breakthrough.
Yiwei Lithium Energy said that holding a 49% stake in Xinghua Lithium Salt is conducive to the company’s further focus on the main business of lithium batteries, which is of positive significance for the company to develop the upstream industrial chain and optimize the industrial layout; cooperation with Lanxiao Technology is conducive to its development in the industry. The in-depth cooperation and layout of the lithium resource industry chain is of positive significance for the company to continue to improve its own industrial chain layout.
In addition to BYD and Yiwei Lithium, companies such as Ningde Times and LG have also joined the team to grab lithium. According to reports, CATL will take a stake in Manono, the world‘s largest lithium mine, on September 27, 2021, and will compete fiercely with Ganfeng Lithium to acquire Canada’s Millennium Lithium. In January 2022, LG Energy signed a binding offtake agreement with Australian lithium miner Liontown Resources Ltd.
In Qi Haishen’s view, with the increasing demand for lithium batteries in the new energy vehicle industry, the safe and stable supply of upstream products such as lithium mines and lithium salts has become the key to the development of the industry or even a bottleneck, and the prices of various raw and auxiliary materials are rising. Under this circumstance, buying and locking mines has become the most secure operation.
In recent years, with the rapid growth of new energy vehicle production, the demand for power batteries has also continued to expand, and the price of upstream lithium materials has also increased. According to Baichuan Yingfu data, as of January 13, 2022, the long-term price of domestic spodumene mines is between US$2,630/ton and US$2,680/ton.
In terms of lithium salts, taking lithium carbonate as an example, as of January 13, the price of industrial lithium carbonate rose to 302,500 yuan / ton, an increase of 11.83% from last week’s price, a 42.35% increase from last month’s price, and a 17.48% increase from the beginning of the year. ; The price of battery-grade lithium carbonate rose to 327,400 yuan / ton, an increase of 11.59% from last week’s price, a 46.87% increase from last month’s price, and a 15.93% increase from the beginning of the year.
Qi Haishen said that BYD, Yiwei Lithium Energy and other companies strategically extend the industrial chain and lock in lithium mining or lithium salt production and processing, which can further consolidate their respective development positions and ensure the stability of the industrial chain, improve the ability to resist risks and obtain more earnings.
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