AGY (ASX) Fundamentals (New)

Originally posted by BytheHorns ↑

Some pretty interesting info in the ORE Quarterly:

LITHIUM MARKET

During the June quarter ex-China lithium carbonate contract prices continued to edge higher, closing the gap with stagnant and declining China spot prices. The spot prices in China experienced decline during the quarter as a result of subsidy policy changes having an effect on demand due to the need for cathode and battery manufacturers to adjust to the new requirements and the need for raw material producers in China to move excess inventory. Key South American suppliers have guided toward strong H2 2018 pricing citing robust demand, particularly from cathode customers amidst a shortfall of battery grade lithium carbonate and hydroxide. The market had expected improved supply conditions with expansions expected to come on line in 2018 from Australian hard rock projects and Chinese conversion plants. But despite growing imports of Australian concentrate and direct shipping ore (DSO) through Chinese ports, the overall supply/demand balance continues to be tight as conversion plants reported significant technical difficulties commissioning new capacity and converting new supply.

As of the end of 2017 approximately 24kt LCE concentrate and almost 70kt LCE DSO was stockpiled in China due to restrictions at Chinese conversion plants with most operating below 70% of capacity. Given growing imports of new Australian spodumene concentrate supply, this bottleneck became more apparent. During the March quarter, approximately 70% of the concentrate and DSO volume was below a 6% grade concentrate* (import data sourced from Chinese Customs) and there were reports of growing stockpiles throughout the supply chain at ports, warehouses and plants.

Given only ~5% of Chinese imports of ‘non-Greenbushes’ material was at or above 6% during Q1 2018, several new hard rock producers have announced ongoing efforts to improve grade during H2 2018 via additional plant and equipment. Additionally, the leading DSO supplier has announced plans to progressively decrease supply for the remainder of the year. This decision comes amidst 12 months of market speculation regarding the technical and economic viability of DSO.

Given very little to no sales of battery grade material have been made in the spot market, the price is indicative of speculative trading rather than demand from the growing battery segment. In contrast, demand for battery grade material from suppliers to the contract market has grown reflecting robust demand conditions. Both SQM and Albemarle attest to strong demand growth rates of 20% and 18% CAGR to 2025 respectively, based on their customer’s long-term order books.

This sentiment is echoed downstream by the battery supply chain with continued investment in additional capacity buoyed by car manufacturer targets. Battery manufacturing capacity is expected to more than quadruple, growing from 115GWh in 2017 to 470GWh in 2025 although continued expansion beyond this is likely. While numerous smaller players have announced expansions and new entrants are expected to be drawn into the industry by its growth prospects, over 50% of the capacity is forecast to be accounted for by Panasonic-Tesla, CATL and LG Chem (Benchmark Minerals, 2018).

As the downstream battery supply chain expands largely in line with company guidance, it has become increasingly apparent that the current deficit of lithium carbonate and hydroxide is likely to persist due to slower ramp-up profiles than expected. Significant technical improvements are required to lift output and unlock persisting bottlenecks. On this basis, it is the Company’s view that tight market conditions will persist in the short-term with some lumpiness or variability to be expected in supply and demand as the market grows.

*‘new’ is defined concentrate or direct shipping ore entering the market since 2017. Lithium Carbonate Equivalent (LCE) has been calculated and adjusted for quality. Assumptions of grade based upon price achieved versus price agreed off 6% grade basis.

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Looks like AGY has timed their run to perfection given market demand for BG lithium. We only need that last box ticked and we're away.

No.	Vol.	Price($)
17	1835821	4.0¢

No.

Vol.

Price($)

1835821

4.0¢

Price($)	Vol.	No.
4.1¢	143113	4

Price($)

Vol.

No.

4.1¢

143113

No.	Vol.	Price($)
17	1835821	0.040
12	2890990	0.039
13	658228	0.038
8	429040	0.037
6	755115	0.036

No.

Vol.

Price($)

1835821

0.040

2890990

0.039

658228

0.038

429040

0.037

755115

0.036

Price($)	Vol.	No.
0.041	143113	4
0.042	20822	1
0.043	704390	2
0.044	641253	4
0.045	443242	6

Price($)

Vol.

No.

0.041

143113

0.042

20822

0.043

704390

0.044

641253

0.045

443242

(20min delay)
Last 4.1¢		Change -0.001(2.38%)		Mkt cap ! $59.69M

Open	High	Low	Value	Volume
4.4¢	4.4¢	4.0¢	$257.1K	6.183M

Fundamentals (New), page-511

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Fundamentals (New), page-511

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