Financial Review - copyright link
Jul 17 2018 at 2:07 PM
Updated 1 hr ago
Lithium past its peak as price slides
Prices for lithium sold into China have fallen for the second consecutive
quarter, challenging claims that a price slide in the early months of 2018
was solely caused by "seasonal factors".
The continued price slide was confirmed by Australian lithium exporter Galaxy Resources,
which declared that prices for lithium carbonate sold into China had slipped by 18 per cent in
the three months to June 30.
The Chinese price for lithium hydroxide, which is increasingly preferred by the manufacturers
of batteries for electric vehicles, fell by 4 per cent during the quarter according to Galaxy.
The falls came after Chinese prices for lithium carbonate and lithium hydroxide fell by 10 per
cent and three per cent respectively in the three months to March 31.
Upon reporting those price falls in April, Galaxy sought to dismiss them as seasonal trends in
a market where tight supply would ensure continued strength in prices.
The company said this week the lithium market was seeing "maturing seasonality" in pricing,
and changes to Chinese government subsidies for electric vehicles had led to destocking of
certain lithium products.
Prices for lithium in China have generally been higher than in other markets in recent years,
and Galaxy said the recent slides were a sign of "convergence" with lithium prices in other
parts of the world.
"Rest of world pricing continued to grow to record levels throughout the quarter
demonstrating the robust and maturing nature of the current market for lithium products,"
said the company in a statement.
by Peter Ker
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The convergence theory may explain why rival
lithium producers that sell their product into
non-China markets have reported rising prices in
recent weeks.
ASX listed Orocobre sells to a range of nations
across Europe, North America and South-East
Asia, and it recently reported sequentially higher
prices in all four quarters of fiscal 2018.
Aside from geography, lithium prices also differ
according to product grade and the level of
beneficiation, and Canaccord Genuity analyst Reg
Spencer said investors should be wary of judging
the entire lithium sector on movements for one
particular type of lithium.
"There are hundreds of different (lithium)
products all at different specifications and they all
sell at different pricing, unfortunately the equity
market tries to simplify what is a rather complex supply chain and rapidly evolving sector into
one number," he said.
Mr Spencer said while daily market or "spot" prices for lithium in China had fallen, prices for
lithium supply on longer terms had been more robust.
"If you look at non-China contract prices they are still trending up," he said.
Mr Spencer said there had been seasonality in Chinese lithium prices in recent years, with the
six months to December 31 tending to be stronger than the first half of each year.
The fall in Chinese lithium prices comes after such prices quadrupled over the past four years,
and many analysts, including UBS, predicted earlier this year that lithium prices would peak in
2018.
Chinese prices are most relevant to Australia's hard rock lithium producers, who typically
produce lithium-rich spodumene concentrate and sell it to China.
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Aside from Galaxy, the biggest shareholder in the Greenbushes mine, Tianqi also sells a lot of
its Australian lithium products into China, while Pilbara Minerals is also scheduled to sell
some of its product into China.
Spodumene concentrate is also being produced at Tawana's Bald Hills mine and the Mt
Marion mine that counts Neometals and Mineral Resources Limited among its owners.
Mr Spencer said the three months to June 30 had been a good period for Galaxy on an
operational level, with the company producing and selling more spodumene concentrate in
the period.
The company produced a higher grade product than in the March quarter and received higher
margins on each tonne of concentrate sold.
"There were some material improvements in performance across all the key operating
parameters which is good to see because the March quarter performance was a little
disappointing," said Mr Spencer.
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