Monsters of Rock: Pilbara Minerals says carmakers asleep at the wheel as lithium prices continues to accelerate
Boss Ken Brinsden says analysts underestimate just how tight the lithium market is, and carmakers will struggle to find the lithium needed to fill EV orders as demand booms. His comments suggest further price rises could be on the cards for the key battery metal.
PLS banked record operating cash flows from the miner’s Pilgangoora operations in the December quarter. It promises record high spodumene lithium concentrate prices of US$2600-3000/t in the upcoming March quarter.
Brinsden said on a conference call today that electric vehicle manufacturers did not do enough during the industry’s down period between 2018 and 2020 to support supply for the current explosion of EV demand.“I don’t want to be trite but carmakers have been asleep at the wheel,” he said.
“They haven’t been paying enough attention to the supply base in battery raw materials in the last five years.“And it’s coming back to haunt them because insufficient incentive was placed in the market when it was really required especially in that period 3-5 years ago to get to where we needed to be today.
” Brinsden said end users of lithium products had not sent enough capital to miners and failed to provide definitive offtake agreements when they needed to provide confidence to the industry.
That has created a dearth of new supply Brinsden said “now will take some years” to sort out.Pilbara Minerals share price today:
To the winners go the spoils
Higher prices were somewhat offset by the impact of WA’s well documented labour shortages with PLS’ spodumene shipments falling from 91,549dmt in September to 78,679dmt.Production of 83,476dmt was slightly below its 85,000-95,000dmt guidance range, which came after plant commissioning delays saw PLS reduce its FY22 guidance by around 50,000t from 460,000-510,000t to 410,000-460,000t last month.
But PLS banked $115.5 million in operating cash flow in the three months to December 31, pumping its bank balance up from $137.3m to $245m.Average prices were in the range of US$1750-1800/dmt, with a record US$2350/dmt being paid for a parcel sold through its online Battery Material Exchange platform in October.
That should be blown out of the water by contract prices in early 2022 based on PLS’ forecasts.Brinsden said spodumene is “not iron ore”, saying the market is so tight that chemical conversion plants in China, Japan and Korea with contractual obligations to supply battery and
EV makers will pay “anything” to get their hands on the good stuff. Price monitor Platts has seen lithium carbonate changing hands in the past week for as much as 386,000RMB/t, the equivalent of US$60,600/t.
“What it means is if a chemical converter is receiving US$60,000 or over US$60,000/t for their battery grade carbonate … they have approximately US$50,000 left to spend on their raw materials of which spodumene is obviously a major component,” Brinsden said.
“The chemical conversion industry can afford to pay a lot more for spodumene and my view is they likely will.”Good news for lithium miners, especially given Brinsden, who noted PLS’ own challenges ramping up production as it expands its Pilgangoora plant and restarts the Ngungaju project next door formerly operated by Altura Minerals, said supply will be harder to increase than analysts think.
“Bringing on spodumene supply and lithium units globally is challenging,” he said.“Especially when you think about the combination of volume, volume growth and quality and each of those are going to be overestimated in our view. “In which case markets will continue to be tight for quite some time.”
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