Lithium Market Yr-to-Date Assessment (Up to date June 2023)

Lithium costs in focus

After rallying for the reason that finish of 2020, lithium costs started to drag again on the finish of 2022, after they took a downward flip. Chinese language lithium costs have been declining from their all-time highs since November, though in April costs rose for the primary time in 5 months.

In a current webinar, William Adams, head of battery and base metals analysis with Fastmarkets, mentioned that the agency had anticipated costs to peak within the fourth quarter of 2022, with costs reaching their peak in November and transferring down fairly closely.

“It was a results of a mix of the very excessive costs creating big margins, and that dragged in further provide into the market, however we additionally noticed some kind of demand hit as nicely,” he mentioned.

Lithium demand is predicted to extend by 28 p.c yr on yr in 2023 and 24 p.c yr on yr in 2024, with the electrical car (EV) section set to signify 73 p.c of all demand, in response to Fastmarkets’ forecasts.

“We anticipate the market to stay in deficit this yr and subsequent,” Jordan Roberts, battery uncooked supplies analyst at Fastmarkets, mentioned. “We’ve got to think about the truth that provide at all times disappoints to the draw back, and we are able to in all probability anticipate delays to new items suspected to come back on-line and ramp up in the course of the the rest of the yr.”

Although they’re transferring to extra sustainable ranges, Fastmarkets is anticipating costs to stay unstable.

Lithium producers publish quarterly outcomes

Some lithium miners have been hit by easing costs in the course of the previous few months, however producers additionally stay optimistic concerning the want for lithium this yr.

Charlotte-based Albemarle (NYSE:ALB), which noticed its lithium gross sales improve in 2022 on the again of excessive lithium costs, mentioned it expects its vitality storage section gross sales volumes to be up 30 to 40 p.c in 2023 in comparison with 2022. Nonetheless, the corporate, which has lithium brine property within the US and the Salar de Atacama in Chile, has revised its goal as a result of worth efficiency of lithium.

“We see robust gross sales quantity development for the remainder of the yr however have modified our steering to mirror softening lithium market pricing,” CEO Kent Masters mentioned in a assertion.

Chile’s SQM (NYSE:SQM) is anticipating demand to extend this yr, forecasting demand development to succeed in 20 p.c. However the lithium miner, which additionally operates its main lithium enterprise within the Salar de Atacama, noticed its gross sales drop within the first quarter of 2023 in comparison with the identical interval final yr.

The corporate mentioned superior purchases within the earlier quarter, the change in subsidies in China and the excessive stage of inventory throughout the battery provide chain, had been the explanations behind weaker demand, predominantly in China, to start with of the yr.

“Primarily based on the current improve in buyer exercise, we consider that the destocking interval has concluded and anticipate our gross sales volumes to get well within the upcoming quarters,” CEO Ricardo Ramos mentioned in a assertion.

In the meantime, after seeing its income virtually double final yr because of larger costs, Argentina-focused Livent (NYSE:LTHM) noticed additional will increase with its Q1 2023 income. The corporate, which operates its lithium enterprise in Argentina’s Salar del Hombre Muerto, additionally mentioned it stays on monitor to ship all beforehand introduced capability expansions.

Australian producers additionally posted quarterly outcomes as lithium spodumene feedstock costs soften however maintain on to historic excessive ranges.

Western Australia’s Pilbara Minerals (ASX:PLS) is anticipating costs to proceed to ease within the quick time period. Lithium pricing may probably strengthen within the second half of this yr “as restocking of stock ranges in China happens throughout the availability chain,” the corporate mentioned in a assertion.

In its monetary yr Q3 outcomes, Mineral Sources (ASX:MIN) introduced it had lowered its FY2023 lithium battery chemical substances gross sales steering for the Wodgina challenge, a three way partnership with Albemarle, as a consequence of market situations. The corporate reported that it expects spodumene focus manufacturing and lithium battery chemical gross sales from the Mt Marion challenge, which it owns collectively with Ganfeng, to come back in on the decrease ends of steering due to a delay with the positioning’s plant growth and mine sequencing. Mineral Sources raised the FY2023 spodumene FOB value steering for Mt Marion for that reason as nicely.

For ASX-listed Allkem (ASX:AKE), regardless of current volatility, the basics underpinning lithium demand stay very robust. Within the final quarter, the corporate noticed manufacturing improve at its Olaroz facility in Argentina and at Mt Cattlin in Australia.

Lithium M&A exercise picks up tempo

Consolidation within the lithium house has taken heart stage for the reason that begin of 2023. Earlier within the yr, high lithium miner Albemarle supplied US$3.7 billion to purchase Australia’s Liontown Sources (ASX:LTR,OTC Pink:LINRF) however was rejected. The yet-to-be in manufacturing ASX lithium mining firm, which is growing the Kathleen Valley challenge in Western Australia, hopes to see first manufacturing by mid-2024. The asset is predicted to produce about 500,000 metric tons of spodumene focus a yr to world markets.

One other Australian miner, Important Metals (ASX:ESS,OTC Pink:PIONF) additionally declined a bid, with this one coming from a three way partnership shaped by main producers Tianqi Lithium (OTC Pink:TQLCF,SZSE:002466) and IGO (ASX:IGO,OTC Pink:IPGDF).

However the largest M&A information got here in Might, when lithium producers Livent and Allkem inked a US$10.6 billion mega merger deal. Lithium consultants consider extra consolidation is forward for the sector as demand for lithium continues to extend.

RK Fairness’s Rodney Hooper informed the Investing Information Community that any massive useful resource challenge in a Tier 1 jurisdiction will probably be purchased out or merged. Regardless of the offers signed with junior miners in current months, for the skilled, authentic gear producers must get extra concerned. “Offtake agreements are an inadequate hedge; additionally they must lock in decrease long-term lithium costs,” Hooper mentioned.

Lithium skilled Joe Lowry of World Lithium additionally expects extra consolidation within the lithium market.

“I feel you would possibly see among the higher small exploration performs in Western Australia simply get absorbed ahead of they’d have in any other case, simply because it’s a seize for the rock now,” he mentioned. “Why wait till they’ve a market cap of $500 million for those who can choose them off after they’ve obtained a market cap of $50 million?”

EV makers proceed to lock down lithium provide

For automobile producers from Tesla (NASDAQ:TSLA) to Common Motors (NYSE:GM), the previous few years have seen the race to safe a gradual provide of lithium improve — and this elevated much more up to now yr, as costs climbed and geopolitical tensions uncovered the vulnerabilities of the worldwide lithium provide chain.

Following offers earlier this yr, similar to Common Motors’ funding in Lithium Americas (NYSE:LAC) and the amended settlement between Piedmont Lithium (ASX:PLL) and Tesla, US carmaker Ford (NYSE:F) stepped up its lithium sport signing 5 provide agreements in Might, two of that are with established producing firms Albemarle and SQM.

“This can be a huge second for Ford. Offers with builders are essential, however ones with lively producers are irreplaceable,” Simon Moores, CEO of Benchmark Mineral Intelligence, mentioned. “The lithium land seize is underway.”

The Michigan-based firm’s remaining three offers had been all with firms growing sources but to come back on stream: Compass Minerals (NYSE:CMP), privately owned EnergySource Minerals and Quebec-focused Nemaska Lithium (TSX:NMX). Ford grew to become the primary buyer of Nemaska with their deal.

Chile strikes to achieve extra management of lithium trade

In April, Chile’s President Gabriel Boric revealed plans to nationalize the nation’s lithium trade, aiming to spice up its financial system and defend the setting. Future lithium contracts in Chile will now solely be issued as public-private partnerships with state management, Boric mentioned.

Prime lithium producers Albemarle and SQM have operations within the nation, with contracts that expire in 2043 and 2030, respectively. SQM has already began conversations with state-owned Codelco, tasked to deal with the talks, whereas Albemarle is predicted to comply with swimsuit quickly.

Chile can also be planning to request all new lithium developments to make use of direct lithium extraction, a method but to be commercialized at scale, to hurry up manufacturing and cut back water consumption.

The South American nation’s transfer follows Mexico’s nationalization of its lithium trade final yr, though Mexico is but to use lithium at a industrial scale whereas Chile is the world’s quantity two producing nation simply after Australia.