Lithium Universe’s (ASX: LU7) insights from China refineries boost confidence in Québec project

Highlights

• LU7 executives held meetings with established lithium refineries during a visit to China.
• The visit reinforces the company’s construction philosophy of a Jiangsu-style refinery.
• Strategic expansion plans shared by Chinese refineries focused on lithium carbonate amid increasing demand in the region.

The board and CEO of Lithium Universe Limited (ASX: LU7) recently visited several lithium refineries in China. The objective of the trip was to directly engage with industry leaders.

The company highlights the trip as a success, validating its process design, reaffirming its construction philosophy, and evaluating potential strategic expansions driven by market dynamics. The team, led by LU7 Executive Chairman Iggy Tan, inspected several lithium refineries located in the provinces of Hubei, Sichuan and Shangdong.  

Significant opportunity for LU7

The discussions shed light on prevailing market conditions and sustainability issues. The general agreement among industry stakeholders indicated that the current market prices likely reflect the breakeven threshold for producing battery-grade lithium hydroxide and carbonate. This underscores LU7's dedication to navigate the fluctuations of the lithium market and reinforcing its position in the expanding lithium supply chain in North America.

The company projects a demand of 850,000 tonnes of Lithium Carbonate Equivalent (LCE) per annum to meet the needs in North America. Currently, there are no operational converters in the region and around 100k tonnes of planned hard rock converters are in pipeline for construction.

LU7 anticipates that more than 95% of the global spodumene conversion capacity is concentrated in China. In line with efforts to enhance energy security, Canada, like the United States, aims to decrease Chinese involvement in the sector through a "decoupling" or "de-risking" strategy. This growing emphasis on localising the supply chain presents a significant opportunity for LU7 to capitalise on.

Trip validates Québec refinery project

The expansion plans shared by Chinese lithium producers focused on the production of battery-grade lithium carbonate amid increasing demand for lithium carbonate in China. The surge in demand is attributed to the popularity of Lithium Iron Phosphate (LFP) batteries. Lithium carbonate serves as the primary material for LFP batteries.

Currently LFP batteries dominate the domestic EV market in China with more than 67% of installations in 2023. The increasing preference for LFP batteries among Chinese consumers may signal a significant shift in consumer demand. These observations further solidify the company’s strategy to prioritise the development of a 16,000 tpa battery-grade lithium carbonate refinery in Québec.

The company discussed enhancements and adjustments made to various existing plant designs to enhance operational efficiency and increase chemical recovery.

Even after a decade, the design of Jiangsu lithium carbonate plant refinery is used for designing refineries and LU7 intends to replicate the same for its proposed site in Québec.

LU7 shares traded at AU$0.026 apiece at the time of writing on 2 May 2024.