With low lithium prices to persist for longer, Lithium producers...

With low lithium prices to persist for longer, Lithium producers have two choices:
1) Place their mine under C&M, or curb production OR
2) Produce at a loss
If they do (1), their stock price will 'crash', if they do (2) they delay the inevitable and hope that holders take no notice and may require a CR

Why announced lower supply from Western mines have done little to the spot lithium price?
As I mentioned, look at who buys the bulk of lithium, i.e who is the largest customer? China.
China is getting their supplies domestically, and from their own vertically integrated mines as well as from Africa and South America which lithium hodlers can hope won't continue their operations but they would. The Chinese would give them a price enough to help them sustain operations. Because all of the major African mines are owned by Chinese. If Western mines stop producing because of price, it is merely shifting market share to Chile, Argentina, and the Africas.

LTR has a secured offtake from Tesla/Ford/LG but none of them have demand strong enough to boost prices, given low growth in EV in the US. PLS depend on the Chinese and will sell at prices the Chinese will take, and they are price takers. PLS like SQM would have to focus on production increase and cost efficiencies to make the most under the current condition.

When I told you Watch What They (ALB) Do, Not What They Say, we should have taken cues from the largest lithium producer to be prepared to a more protracted winter hibernation. Otherwise, ALB would not have taken those drastic steps to cut capex, curb production, defer projects and layoff staff as well as raising over $1B. To think otherwise believing the lithium situation is transitory is to indirectly say that ALB is being stupid and foolish.

Now PLS has raised an additional $1B debt financing while Henderson remains cautiously optimistic is suggesting that PLS too has recognised a protracted winter is here.

The only ones late to the party in acknowledging winter has been lithium hodlers who continue to find every other angle to justify keeping the faith, from (1) lower price will force supply cuts which will then address the low price issue to 2) lithium price is bottoming.  

The Elephant in the Room that analysts have yet to formally factor is the spectre of a global recession that would result in EV demand crashing driving lithium price into a mini 'abyss'. That would be the time we would see more lithium stocks making further discounted CR where permissible (probably unlikely), some lithium stocks either abandoning lithium exploration to switch to gold and some going into administration altogether.

I've warned lithium hodlers since Feb/Mar and the start of this thread from 1 April 2024, still better late than never.
Lithium mine closures just ‘tip of the iceberg’
Alex GluyasMarkets reporter
Aug 26, 2024 – 2.17pm


The lithium sector is facing a wave of mine closures as prices for the battery material continue to decline despite some companies already delaying future projects.

UBS slashed its lithium price forecasts for the 2025 and 2026 calendar year by up to 23 per cent on Monday as it cautioned that not enough supply was being deferred, and global demand for electric vehicles was softening.

Lithium carbonate prices collapsed 70 per cent in the 12 months through June. AP
This is despite a growing list of companies already curtailing production as the slump in prices intensifies. Carbonate prices in China have plunged 25 per cent this year to $US9000 a tonne, while spodumene is down 19 per cent to $US770 a tonne, the lowest since July 2021.

Core Lithium has already suspended mining at its Northern Territory-based Finniss project, while Arcadium Lithium paused its investment at James Bay in Canada and is considering idling its Mt Cattlin mine in Western Australia. Piedmont Lithium delayed its US Carolina project by two years, while Albemarle scaled back operations for its Kemerton hydroxide refinery.

“While we don’t observe any large-scale curtailments yet, it is clear that the stress of low prices needs to drive production curtailment and delay/deferral of growth projects,” said UBS analyst Lachlan Shaw.


“Core Lithium’s Finniss care and maintenance was [the] tip of the iceberg and will likely see other shuts if spodumene prices persist around [the] spot of $US770 a tonne for the next year to year and a half as we now forecast.”

The broker expects the weak prices will most heavily impact producers, or those soon to produce, through lower earnings, free cash flow and pressure on capital expenditure and dividends.

That was highlighted by Pilbara Minerals, which on Monday reported an 89 per cent slump in its net profit to $257 million for the 2024 financial year. The producer sold its lithium spodumene for an average price of $US1176 per tonne over the period, 74 per cent lower than the $US4447 a tonne fetched in the year prior.

UBS cut its price target on the stock by 8 per cent to $2.30 and slashed its target on Mineral Resources by 20 per cent to $43. The broker has a “sell” rating on both companies.

However, Morgan Stanley suggested that physical lithium markets have started responding to lower prices, with China’s carbonate production down 10 per cent since the end of June.

The broker added that demand for the battery material peaks in the third quarter, and will receive additional support after China doubled subsidies for those trading in cars for electric vehicles and other new energy vehicles.

While carbonate inventories remain at record levels, Morgan Stanley noted that the pace of the increase is slowing as downstream players restock to capitalise on lower prices.

Morgan Stanley said that carbonate prices were already below its fourth-quarter forecast of $US10,000 a tonne, but it believes they are nearing a bottom.

“With slowing China output and future growth plans slowing, the balance could tighten into peak season,” said Morgan Stanley commodity strategist Amy Gower. “This could allow lithium prices to stabilise, or even bounce modestly from current levels.”

Ms Gower said that more supply cuts are needed for a more meaningful change in direction.