China Lithium Market Dynamics & Lithium
Procurement Study© SMM. All rights reserved.

China Lithium Market Dynamics & Lithium Procurement Study

Project Background
Given the rapid growth of LIB demand, the lithium plays morecrucial role as the key raw material. As the leading LIB company, theclient intends to optimize its lithium sourcing strategy bybenchmarking China lithium customer (LIB company & OEM) anddeepens its understanding of China lithium sourcing dynamics

Key Output
Market overview of China lithium value chain & Lithium price forecast• Global & China lithium salty market dynamics

SMM Methodology
Based on client’s request, SMM has scoped the project into 3 modules:• Market overview of China lithium value chain & Lithium price forecast• Battery customer sourcing strategy & analysis• OEM customer sourcing strategy & analysis

Main Research Methodology:• Primary Interviews：- Industry level: conduct in-depth interviews with ~40 lithium value chain• Global & China lithium market supply/demand balance analysis

players, incl. OEMs (4 samples,) battery cell markers (4 samples), cathode• Global & China lithium carbonate & hydroxide price forecast in 2022-2030

makers (10 samples), lithium salty suppliers (15 samples)

Battery customer sourcing strategy analysis- Company level: conduct in-depth interviews with different departments of• Deep-dive of lithium supply volume, pricing mechanism, price analysis

each value chain company, incl. procurement dept., sales dept., cost

• SWOT and future Li supply chain strategies analysis of target companies

monitoring dept., senior management, etc.

OEM customer sourcing strategy analysis• Desktop Research：SMM internal databases, industry public reports• Deep-dive of lithium supply volume, pricing mechanism, price analysis• SWOT and future Li supply chain strategies analysis of target companies© SMM. All rights reserved.

Page 2

China Lithium Carbonate Price Forecast© SMM. All rights reserved.

Global Lithium Resource Supply & Demand
On the supply side, the sharp rise in global lithium salt and ore prices will help strengthen resource development at home and abroad; In 2023, increased mine production will ease supply tightness.
New Project Analysis

Global Lithium Resource S&D Balance
Supply (Right Axis)

Balance （Left Axis）

Demand (Right Axis)

300

0-300

2017

2018

2019

2020

2021

2022E

2023E

2024E

2025E

2026E

1816
141210864
20-2-4-6-8-10L© SMM. All rights reserved.

MINE PROJECT

SOP

Pilgangoora

2023

LH

Kathleen
Valley2024

LH

Mina daCachoeira

2025

L

H

CauchariOlaroz

2023

L

H

Greenbushes

2024

LH

Lijiagou

2023

L

H

RELEASE PROBABILITY

H ：Probability of on-time production low to high（based on SMM primary research）
Page 4

Methodology of Price Prediction (by year) – based on S&D Balance
Price – Based on demand-supply relationshipSupplyDemandTerminal market demand

Expected capacity

Capacity utilization rate

Multisource secondary

Material supply

information&Downstreamorders

SMM primary research

Other factors

New-energy Automotive

Electrical Energy Storage

3C

Small power battery

Ternary Battery

LFP Battery

LFP Battery

LCO Battery

LMO Battery

NCM CathodeMaterial

LFP
Cathode Material

LFP
Cathode Material

LCO
Cathode Material

LMO CathodeMaterial

Unit consumption：xx
LCE Ton / Ton

Unit consumption：xx
LCE Ton / Ton

Unit consumptionxx
LCE Ton / Ton

Unit consumption ：xx
LCE Ton / Ton

Unit consumption ：xx
LCE Ton / Ton

Sample results → Overall supply quantity

Overall demand for Li2CO3*Notes：1) Other factors affecting capacity utilization include electrical power rationing policies and industry-related governmental policies. 2) Unit consumption quantity varies according to actual situation.
© SMM. All rights reserved.

Weight ratio of the factor（adjusted yearly）

Page 5

Methodology of Price Prediction (by year) – based on Cost Curve

Price – Based on production costs
Overall production costs
Material costs（E.g. Sspondumene concentrate）Spondumene concentrate
unit price

Unit consumption(xx ton/ton)Spondumene concentrate
production costs

Expected net profit rate
(Based on SMM primary researchdata and industry evaluation）

Concentrate material (ore)production costs

Concentrate processing costs（Based on base year costs，considering inflation etc.）

Expected net profit rate

Production costs

Based on SMM primary research data

Base year costs（ Based on SMM database,including labour, energy
consumption, auxiliarymaterials, depreciation,
environmental costs)

Inflationrate（+xx% YoY）

and industry evaluation

Ore costs（Based on SMM database, including labour, energy consumption,explosives, fuel, and other auxiliary materials）© SMM. All rights reserved.

Page 6

Cost-curve summary (2020-2030)
Market Dynamics

Cost Curve Summary

SMM Analysis

350,000
300,000

Phase I
Y20-Y22• Supply ＜ Demand• Price Upward phase The surge of lithium carbonate price

250,000
200,000

 the non-integrated companies suffering fromlarge increase of cost

150,000
100,000
50,0000xxxxx400,000

Phase II
Y23E-Y25E• Supply Surplus• Price Downward phase

300,000• The price reduction of lithium carbonate

200,000
100,0000xxxxx

400,000

Phase IIIY26E-Y30E• Supply Surplus• Price Downward phase•

Cost level for the whole lithium carbonate
market maintained stable•

But variation is affected by the ore grade andinfluence of EHS

300,000
200,000
100,0000© SMM. All rights reserved.

• The apparent cost reduction for non-integrated
companies

xxxx

Unit: USD/LCE Ton, Exchange rate: 1USD=6.68 RMBxPage 7

Lithium Procurement Deep-dive Study© SMM. All rights reserved.

CATL – Li2CO3 Supply ChainLithiumProductLithium
Supplier

Cooperation
Method•SQM

ZhicunLithium

Li2CO3The
procurement
is paid byCATL

Long-term
ContractLong-term
Contract•••

ZhiyuanLithium

Long-term
Contract

Tibet Mining（西藏矿业）

Spot Contract（provide crude
Li2CO3）

Yongxing（New supplier）

Long-term
Contract•

OthersSpot Contract-(2022H1 Review & 2022H2 Forecast)

2022H1: SMM Li2CO3 Monthly
Highest Price (M-2)*Payable(xx%)
2022H2: SMM Li2CO3 Monthly
Highest Price (M-1)*Payable(xxx%)

3100250

10Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec22022E: SMM Li2CO3 Monthly
Price (M-2)*Payable (xx%)
2022E: SMM Li2CO3 Monthly
Price (M-1)*Payable (xx%)

0Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

0.50.00100

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

0In 2022H1, besides the stable and major supply from
SQM, CATL has also purchased from domestic lithium
supplier:- For SQM, xxx

100- For Zhicun, xxx

0- For Zhiyuan, xxx

0.5100xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

0.002022E：Spot price2022E ： SMM Li2CO3 Monthly
Price (M-1)*Payable (xx%)

01002•Key Findings

Supply Volume & Price

Pricing Mechanism

0Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

50

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

100© SMM. All rights reserved.

Price(USD/LCE kg) Right Axis

Volume (KT LCE) Left Axis

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec*Note: The Exchange rate (Sep. - Dec.) is based on monthly average (Jan. – Aug. )Page 9Lithium Securing Method Assessment
Spot sourcing contract

Long-term contract

Investment (JV/Shareholding)Description

Supplyagreement
withlimited
guarantees on volume and priceLong-term offtake agreement withvolume and/or price guarantees

Co-investment with strategic partner
in resource securing

Advantage &Disadvantage• High volume flexibility• Low commitment in fulfillingvolume guarantees• More cost-effective pricing
mechanisms (i.e. formulabased)• More flexibility on volumeincrements• No upfront CAPEX required• High influence on productdesign based on self demand• High exposure to spot pricefluctuation• Less ability to select feedstockwith higher quality• High upfront CAPEX required• High uncertainty of supplystability• Mid-/long-term commitmentin procurement

Representatives© SMM. All rights reserved.

Mainly adopted by domestic LIB
supplier & tier 2 supplier

Nearly all LIB supplier & OEM
adopt LTC mechanism•

High operational control inprojects (e.g. quality &compatibility)• Participation in profit sharing• High uncertainty forsuccessful SOPs

Leading LIB company & OEM withabundance in capital

Page 10

Lithium Carbonate Procurement Analysis for CAM Manufacturer (1/2)

Key Lithium Supplier

CAM Manufacturer

SMM Comments

Tianqi Lithium
xxton，25%

Three types Supplier:Livent
xxton，25%

1) mainstream lithium salt plants (Tianqi, Livent)xxxxxxxxxxxxx

Li2CO32) Purchase from the parent company (Huayou)

Ganfeng Lithium

xxxxxxxxxxxxx

xxton，15%

Huayou Recycling
xxton，5%
XX，XX%：lithium salt purchase amount and proportion of B&M© SMM. All rights reserved.

Page 11

Lithium Carbonate Procurement Analysis for CAM Manufacturer (2/2)

MaterialSupplier

Contract Model &Duration

Pricing and Adjustment Mechanism长单Long-term Contract（一年执行中）The internal pricecommittee refers to theprice of different websites

Long-term contract：fixedamount with flexible price(Price -Monthly Settled)

Long-term Contract

xxx

xx

Long-term Contract（within 1 year）

xxx

xxx

SMM Comments• Tianqi：xx• B&M：xx• Livent：xx• B&M： xx

Li2CO3xxx© SMM. All rights reserved.

xxx

xx%xxx• Ganfeng：xx• B&M： xx• Huayou Recyeling：xx• B&M： xx

Page 12