ADVERTISERSSNEWSLETTERLithium miners shake up trading to tackle...

ADVERTISERSSNEWSLETTERLithium miners shake up trading to tackle wild price swingsBloomberg News | May 20, 2024 | 11:05 am Battery Metals Intelligence Markets Top Companies Australia China Latin America Lithium Pilgangoora lithium project. Credit: Pilbara MineralsThe world’s lithium miners — facing an unprecedented demand surge and wild price swings — are shaking up the way the commodity is bought and sold.As lithium emerges as a linchpin of the global energy transition, the industry is in the grip of a slow-motion revolution that earlier upended commodities like iron ore: a push for more transparent and industry-wide pricing.SIGN UP FOR THE BATTERY METALS DIGESTSIGN UPAlbemarle Corp., the No. 1 lithium supplier, has held a series of auctions since March where potential buyers compete for cargoes via bids. These sales are a significant step for lithium, which until relatively recently was largely sold at prices fixed in long-term contracts.For now, there’s a patchwork of spot price references — and nascent futures markets — but little consistency on how to value each unit of lithium as it flows along a supply chain from mines to electric vehicles.“The auctioning of lithium does two things,” said Przemek Koralewski, global head of market development at price reporting agency Fastmarkets. “It allows miners to get the price of the day and it means that the contracts on which most material is sold is truly reflective of market dynamics.”Ballooning demand from batteries and electric vehicles has transformed lithium from a niche metal into a closely-watched commodity pulling investment in the tens of billions of dollars. But it’s also triggered massive volatility and growing complexity.Iron ore miners faced a similar quandary in the first decade of the 21st century as Chinese consumption of the steelmaking ingredient exploded. Then, BHP Group Ltd. led a controversial charge to bury the decades-old regime of annually negotiated benchmarks in favor of floating prices that underpin the market today.It’s “not unlike how the iron ore market evolved,” said Chris Berry, president at consultancy House Mountain Partners. “These auctions and the increasing liquidity in lithium futures are a good sign.”The idea is that more regular, open spot pricing by bids and offers allows market participants to respond more quickly to changes in supply and demand, thereby clearing the market more efficiently in boom times as well as bad.For spodumene — a lithium-bearing raw material — regular spot prices in China put out by researchers have been used as one reference but haven’t been satisfactory, Standard Lithium Ltd. chief executive officer Robert Mintak said.These can “drive the market crazy and confuse investors, confuse developers, and confuse off-take negotiation,” Mintak said. Albemarle’s auctions help to show how close the China price is to reality, he said.Early daysAlbemarle’s four auctions April and March — plus a further three due this month — are not the first in the industry. Australian producer Pilbara Minerals Ltd. started a digital platform for auctions from 2021, and Mineral Resources Ltd. is also planning one. Meanwhile, futures trading has also taken off in China from last year.Albemarle plans more bidding events ahead, expanding from sales of spodumene concentrate and lithium carbonate to lithium hydroxide.“Lithium is early in its life cycle,” Albemarle said in emailed comments. “Frequent, high-quality data points are key to supporting transparent, reliable, and robust price indices.” The firm plans to hold auctions at least every two weeks, it said.Lithium prices are coming out of a boom-to-bust period that left in its wake an array of stalled projects, scrapped deals and production cuts. One measures of prices — for lithium carbonate in China — is about 80% below its levels at the peak of a boom in 2022. The market is still grappling with inflated inventories from that period.There’s also growing divergences between different products as the supply chain matures. Long-term contracts have historically been linked to the downstream chemicals market rather than the mined raw material, spodumene, that has become a staple source only in the past decade. And the price relationship between the two is breaking down.“We are becoming more in control of our own pricing, which was initially driven off of lithium chemicals,” Ana Cabral, chief executive officer of miner Sigma Lithium Corp., said in an interview. “Ultimately the risk-reward system has to be aligned with the pricing mechanism. The ones who produce the concentrate — the pre-chemical — take all the risk.”Lithium producers are navigating not just explosive growth in demand, but geopolitical and regulatory shifts that could lead to bifurcations across different geographies. The West is trying to rely less on supply chains that run through China, and there’s a growing focus on the varying carbon footprint of different sources.“It is important for miners to demonstrate the value of their products when the dynamics of lithium feedstock and chemicals diverge,” said Susan Zou, Shanghai-based analyst at Rystad Energy.(By Annie Lee and Yvonne Yue Li)Share MINING.COM RECOMMENDSRanked: The world’s largest lithium producers in 2023Australia, Chile, and China—accounted for 88% of lithium production last year.Visual Capitalist - Elements | May 23, 2024 | 11:26 amSQM expects to close Codelco lithium deal by May 31 deadlineSome analysts had cautioned the deal could be delayed after an earlier deadline was extended two months due to complexities in the negotiation.Reuters | May 23, 2024 | 11:16 amAris Mining gains controlling stake in Soto Norte projectAris is starting a pre-feasibility study for the new development plan, which it expects to complete by early 2025.Staff Writer | May 23, 2024 | 11:02 amPakistan coal miners face expansion issue as China stops fundingIn 2021, China President Xi Jinping pledged to halt all coal construction and financing abroad.Bloomberg News | May 23, 2024 | 10:49 amSPONSOREDData-driven decisions: empowering mill operationsCOMMENTSYour email address will not be published. Required fields are marked * Save my name, email, and website in this browser for the next time I comment.More NewsRio Tinto faces pressure to leave London exchangeCecilia Jamasmie | May 23, 2024 | 5:18 amMa’aden extracts lithium from seawaterStaff Writer | May 21, 2024 | 10:02 amPortuguese company eyes two lithium refineries in Iberia by 2030Reuters | May 21, 2024 | 8:25 amDubai mining firm plans to start Argentina lithium production next yearReuters | May 20, 2024 | 10:40 amTerms of Use About Us© 2024 The Northern Miner Group, All Rights ReservedAdvertise Contact Us