Guotai Haitong: China's Salt Lake Overall Production Will Continuously Increase; Salt Lake Resources Expected to Gradually Concentrate in Large Companies

Cathay Securities and Haitong Securities released research reports stating that starting in 2025, Tibet salt lakes will gradually ramp up production. Mami Co., Lagu Co. will enter the commissioning phase, with output gradually released. Later, Tibet will also bring into production backup salt lakes such as Jiezhe Chaka and Longmu Co., along with increasing output from Qinghai. The overall salt lake production in China will continue to grow. Regarding capital expenditure, based on publicly disclosed data from various companies, the investment in 10,000 tons of lithium salt in South American salt lakes exceeds 1.5 billion RMB. The long cycle and large capital costs mean that only larger companies have the capacity to invest in salt lake lithium extraction. Salt lake lithium resources will gradually concentrate in major corporations.

Cathay Securities and Haitong Securities’ main points are as follows:

Salt Lakes: The lowest-cost lithium extraction process, with room for further technological improvement

Lithium production mainly involves three processes: salt lake lithium extraction, spodumene lithium extraction, and lepidolite lithium extraction. Among these, salt lake lithium extraction is the most cost-effective due to its relatively simple process and higher value of by-products. According to estimates from various companies, in 2024, the cost of lithium carbonate from salt lake enterprises will be between 30,000 and 48,000 RMB per ton, spodumene lithium carbonate production costs are around 80,000 RMB per ton, and typical lepidolite companies also have costs around 80,000 RMB per ton. Salt lake lithium extraction companies are positioned at the lower end of the overall cost curve. The technology for salt lake lithium extraction continues to improve. Currently, Qinghai Salt Lake Research Institute has developed a new lithium-specific extraction agent that can effectively reduce costs. There is potential for further cost reductions in the future. Recommended stocks include Zangge Mining (000408.SZ) and related targets like Salt Lake Co. (000792.SZ).

China’s Salt Lakes Rise to Become a Key Lithium Salt Supplier

Currently, China’s salt lake lithium production capacity is mainly concentrated in Qinghai. Listed companies include Salt Lake Co., Zangge Mining, and Ganfeng Lithium, with key projects at Charkhans Salt Lake and Yiliping Salt Lake. Additionally, Dongtai Genaer, Xitai Genaer, and Dachaidan Salt Lake are also important production sites. Starting in 2025, Tibet salt lakes will begin to ramp up, with Mami Co. and Lagu Co. entering the commissioning phase, gradually releasing production. Later, backup salt lakes such as Jiezhe Chaka and Longmu Co. will come online, along with increased output from Qinghai. The overall Chinese salt lake output is expected to continue rising. Estimates suggest that by 2030, China’s salt lake production will reach 500,000 tons, making it an important part of global lithium salt supply.

South American Salt Lakes Continue to Contribute Incrementally, with Argentina Leading

South American salt lakes are a major source of global salt lake production. The salt lake resources in the South American Lithium Triangle are abundant, with the Atacama Salt Lake being the main mining area, producing about 400,000 tons of lithium carbonate annually. As projects like Mariana, 3Q, and Sal de Vida in Argentina come into production, future incremental lithium extraction from South American salt lakes will mainly come from Argentina. Bolivia also has rich lithium resources and is expected to gradually contribute additional output.

High Capital Expenditure, with Resources Gradually Concentrating in Large Companies

Unlike the shorter cycle for hard-rock lithium mining and refining, salt lake lithium projects have longer development cycles. Domestic new projects typically take about 3.5 years from construction to production, while in South America, the cycle from greenfield to production is around five years. Based on publicly disclosed data from various companies, the investment in 10,000 tons of lithium salt in South American salt lakes exceeds 1.5 billion RMB. The long cycle and large capital requirements mean that only larger companies have the capacity to invest, leading to a gradual concentration of salt lake lithium resources in major firms.

Risk Warning

Risks of significant fluctuations in lithium carbonate demand and project commissioning not meeting expectations.