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Are market manipulators putting their foot on lithium prices?

There is a great lithium conspiracy afoot, as one of the world’s biggest miners takes a swipe at manipulation they say is depressing prices of the key battery metal.

It’s fallen downhill since late 2022, with chemical prices dropping from US$80,000/t to the low US$20,000/t range according to price agencies. 6% Li2O spodumene concentrate is down from the roughly US$8000/t highs to US$2150/t according to the usually reputable Fastmarkets.

Bearing in mind its lower grade material cops a discount to the index, Mineral Resources (ASX:MIN) saw prices for its Mt Marion concentrate fall 28% QoQ to US$1870/dmt. In the December quarter last year that same product was valued at US$3,262/dmt.

Why is the market on a downward trajectory? Market manipulation of course.

Quoth MinRes EGM Corporate Development James Bruce: “With regards to the lithium market, there’s nothing wrong with lithium fundamentals,” he told analysts.

“There are three factors at play in the short term. There’s market manipulation with plenty of paper trading, however end user demand is good and the endless supply chain is rebalancing.”

Bruce, presenting as stand-in for Mineral Resources’ (ASX:MIN) billionaire MD Chris Ellison, who will no doubt get a good showing at the miner’s AGM next month, was pressed on this by Jarden analyst Ben Lyons.

Lyons is the resources number-cruncher who was memorably called out for his cash flow projections by Chris Ellison on the July call. The best part was when Ellison invited the analyst over for a coffee if he flew out to Perth, to which Lyons said he already lived in the West, MIN’s PIs clearly off the money.

Yesterday he pressed Bruce on his comments and whether he thought that manipulation was impacting pricing indexes used to determine contract prices with customers.

“But then I also stated that there’s a lot of paper trading that is going on right now in the lithium market and that’s, that’s where my comment was referencing that,” Bruce responded.

“We do continue to sell product based on the industry indices pricing, so it’s an observation … but there are a number of indices out there and you can observe those prices.

“Ben, we supply to our customers based on those indices. It’s a negotiation between us and our customers and yes we do that. My observations stand alone and I’ve made those observations. There’s a lot of paper trading in the market right now.”

There have been concerns from within the sector about the impact of futures prices like the Wuxi exchange, which prompted an equity sell-off in December with a big one-day drop, and the Guangzhou contract launched in July.

According to Fastmarkets that one fell pretty much non-stop from August before a pause and slight bounceback in mid-October, with final quarter restocking approaching. But futures are a common feature of just about any commodity market.

Buyers may, too, have complained about the impact Pilbara Minerals’ publicly announced spot auctions played in lifting price indices during the 2021-2022 boom.

Ellison notably said he wanted to take control of the miner’s marketing, something it is doing after restructuring its Wodgina JV with Albemarle, indicating he would take the price of the day as he did for any other commodity rather than hedge via long-term contracts.

“Albemarle asked me what I’m going to do one day when it all turns around and there’s more supply than demand, and I said I’ll do what I always do, I’ll change,” Ellison said last year, indicating he thought lithium would be short on supply until 2030.

“But in the meantime while supply is short we’re going to take advantage of the price on the way up and I am fairly convinced that I’ve got five to seven years of that.”

Bruce reiterated that confidence yesterday, saying the market was still growing 20% a year ahead of decisions to expand its Wodgina mine in the Pilbara.

There will always be suspicions about what goes on in an opaque and largely Chinese end market like lithium and MinRes is closer than we are. Other experts, like Mr Lithium Joe Lowry, have said this year as prices fell that China is creating a false narrative.

But sometimes a little more detail wouldn’t hurt if you’re going to cry wolf.

Thanks, Josh. I’m back… what’d I miss? Hmm, I might just bang on about graphite for a bit…