Recently, the Geological Survey Bureau of the Ministry of Natural Resources announced that China has made significant breakthroughs in lithium exploration, reshaping the global lithium resource landscape.

Among them, a world-class spodumene type lithium mineralization belt with a length of 2800 kilometers has been newly discovered in the West Kunlun Songpan Ganzi region. Accumulatively discovered over 6.5 million tons, with a resource potential of over 30 million tons. Overall, the newly added resources of spodumene type, salt lake type, and lithium mica type lithium mines have all exceeded 10 million tons, increasing China's global share of lithium reserves from 6% to 16.5% and ranking from sixth to second place.

The significant breakthrough in domestic lithium mining exploration is of great significance for the development of the domestic lithium battery industry.

From the development status of the lithium battery industry in the past period, the fluctuation of upstream raw material prices has caused significant price fluctuations throughout the entire industry chain. Especially the lithium price market in 2022 has sparked a wave of price increases throughout the entire industry chain, resulting in a compression of profits for downstream enterprises and even causing significant losses for some new energy vehicle companies. On the other hand, after the wave of price increases, during the period of declining production capacity, prices across the entire industry chain sharply contracted. This unhealthy pricing system poses a challenge to the stability of industry profitability.

Behind it all, it is actually related to the insufficient supply of lithium resources in China. From the perspective of the proportion of domestic lithium resource supply, the proportion of foreign resource supply led by Australian mines once exceeded 70%. In recent years, with the successive production of domestic lithium mining projects, this proportion has gradually decreased to around 50%. However, the dominance of domestic lithium prices still cannot bypass the pricing mechanism of Australian mines.

In the past, during the significant increase in lithium prices, this key resource relied on foreign countries, which resulted in upstream raw material procurement and sales accounting for more than 50% of the industry's profits. Additionally, due to the lack of sufficient lithium ore supply domestically, the negotiation space for lithium prices was limited.

The significant breakthrough in domestic lithium mining provides more pricing power for key upstream raw materials and more negotiation space externally.

However, it should also be noted that there is still a certain distance between the exploration and identification of lithium reserves and actual mining production.

According to the distribution of lithium mines announced by the Geological Survey Bureau, these discovered lithium mines are mostly located in areas with relatively harsh natural environments such as high mountains and plateaus, and the backward local infrastructure increases the difficulty of lithium mining. Generally speaking, the construction period of lithium mining projects is 2-3 years, and the construction period in high-altitude areas can be as long as 3-5 years. With the addition of local infrastructure such as roads and water and electricity, the project construction period may be further extended.

From the perspective of lithium resource supply, multiple large-scale lithium salt projects have been put into operation by the end of 2024, including the first phase of the Goulamana spodumene project in Mali, Africa, under Ganfeng Lithium Industry. The planned annual production capacity of the first phase of the project is 506000 tons of lithium concentrate; Salt Lake Corporation has a production capacity of 40000 tons of lithium carbonate, and the newly launched 40000 ton lithium salt integration project is currently underway.

According to data disclosed by the Ministry of Industry and Information Technology, the production of battery grade lithium carbonate maintained rapid growth from January to October. In the global supply of lithium resources, it is expected that 25 new lithium mining projects will be put into operation by 2025, and the excess supply of lithium carbonate is expected to further expand.

In the short term, the significant increase in domestic lithium reserves does not affect the lithium salt spot market. However, as a strategic reserve resource, it still serves as a cornerstone for the safe and stable development of domestic industries.