Prices for the spodumene concentrate that most Australian lithium miners sell have declined by close to 90 per cent over the past year and Wood Mackenzie’s principal lithium analyst Allan Pedersen said further falls were likely.
“Wood Mackenzie forecasts a continued decline in spodumene concentrate prices, although at a slower pace than observed recently,” he said.
Spodumene prices are often linked to prices for higher value lithium chemicals like lithium carbonate or lithium hydroxide and Mr Pedersen said the trajectory of chemical prices at a time of rising supply suggested more pain was in store for miners.
“We will see the expansion of Australian assets and many global producers entering the lithium landscape, putting pressure on the prices. However, the market balance for spodumene concentrate will remain relatively balanced due to a large proportion of production being linked to an integrated supply chain through ownership or strong offtake agreements,” he said.
A big uncertainty in lithium markets over the past six months has been the viability of Chinese miners producing lithium out of minerals called lepidolites, which tend to hold the lithium in more complex mineral structures than spodumene.
With more waste elements to separate from the lithium, lepidolites were expected by many Australian miners and analysts to be the marginal source of supply given the greater effort and cost required to process them.
But Mr Pedersen said Chinese lepidolite production would rise particularly in situations where the lepidolites are mined by vertically integrated battery makers like Contemporary Amperex Technology Limited (CATL).
“Regarding lepidolite production, Wood Mackenzie forecasts a strong growth in supply in the coming years, after which supply will level out,” he said.
“A large proportion of the growth will be through investments by CATL, providing a strong integrated supply into the world’s largest battery producer and, therefore, subject to strategic considerations.
“The growth of lepidolite supply in China largely depends on local governments’ mining and smelting permits and, of course, margins.
“There are challenges to be dealt with for lepidolite as the amount of lepidolite consumed for lithium carbonate conversion is also significantly higher than the spodumene, given the lower grades of lepidolite. Therefore, an increase in the supply of lepidolite will likely be affected by ESG concerns.”
Mr Pedersen did not share Wood Mackenzie’s numerical lithium price predictions, but Liontown managing director Tony Ottaviano told investors on Monday the forecaster was tipping spodumene prices to remain anchored near $US950 a tonne until 2029.
Mr Ottaviano said he did not believe supply of lithium would rise as quickly as Wood Mackenzie had suggested if lithium prices were depressed for five years.
“That is a very, very low price,” said Mr Ottaviano of Wood Mackenzie’s suggestion for $US950 a tonne in 2029.
“We cannot believe how a forecast like that can support the supply that they are predicting will come on. It doesn’t make sense.
“Our view is the pricing signals they are forecasting, by definition, would mean that some of that supply just will not come on.”
The Australian lithium sector has already seen curtailments in response to weak prices, with Core Lithium ceasing mining in the Northern Territory and switching to selling stockpiled material.
Core also delayed work on its next lithium mine at BP33.
Albemarle announced last week that it would not proceed with construction of a fourth lithium hydroxide processing “train” at Kemerton in WA, in a decision that will deny the WA economy about $US600 million ($915 million) of investment.
Liontown said on Monday that underground mining at Kathleen Valley would extract 3 million tonnes of raw ore per year, rather than the 4 million tonnes previously planned.
Once Liontown’s Kathleen Valley mine is ramped up to full capacity, it is expected to make money so long as spodumene prices are higher than $US760 a tonne.
But the mine will not produce at its full capacity in the first year or so, and analysts reckon it will need a spodumene price between $US1000 and $US1200 a tonne to make money in the year to June 2025.
Liontown said on Monday it had enough money to complete construction of Kathleen Valley, but in the wake of Monday’s loan withdrawal, it is unclear how the company will fund its first year of production if the mine is generating negative cashflow.
Mr Ottaviano said the lending syndicate – which also includes taxpayer funded lenders like the Clean Energy Finance Corporation and Export Finance Australia – had expressed a desire to continue working with Liontown.
Mr Ottaviano said talks were now focused on securing a smaller loan from the same syndicate.
Australian lithium exporter Pilbara Minerals will update investors on its performance and growth plans on Wednesday, while the nation’s most prolific acquirer of lithium assets, Mineral Resources, will update investors on Thursday.
Read the full article here