PLS (ASX) Good News &amp; Bad News

Originally posted by sabine: ↑

[Stock head website]

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Aussie lithium producers stormed back into the race today. Pic: Getty Images/Dumb Stock head additions
Benchmark Gigafactories APAC: UBS calls lithium bottom, sends share prices surging
Mining
31 minutes ago | Josh Chiat

MinRes big wig says supply is starting to come out of the market as investors pray for a turnaround
Reported closure of major Chinese lepidolite mine sent share prices for local lithium producers and explorer surging today
Thurlow cautioned against reports African lithium producers were operating at lower costs than Aussies

MinRes (ASX:MIN) lithium boss Josh Thurlow says supply is starting to come out of the market, after the reported closure of China’s largest lepidolite mine sent downtrodden share prices surging this morning.

UBS lithium analyst Sky Han said there was 11-23% upside on 2024 chemical prices after reporting to clients that the Jianxiawo lepidolite mine in the Jianxi province had been shut by the world’s largest battery maker.

Reports of the Jianxiawo mine’s closure sent share prices in the Aussie market soaring.

MinRes, down 50% YTD as lithium prices have tumbled, was up over 17%. Pilbara Minerals (ASXLS), down 32% YTD, was up 14%, while Greenbushes owner IGO (ASX:IGO) rose 12%. Arcadium Lithium (ASX:LTM) climbed 12%, having itself taken supply out of the future market with the decision to close its Mt Cattlin mine in WA early next year.

New producers and explorers including Liontown Resources (ASX:LTR) (+16%) and Wildcat Resources (ASX:WC8) (+20%) also rocketed.

Speaking to Benchmark Mineral Intelligence analyst Cam Perks at the Benchmark Gigafactories APAC Conference in Perth today, MIN lithium CEO Josh Thurlow said Jianxiawo’s closure, if permanent, would take a “sizeable chunk” of supply out of the market.
“Everyone’s been sort of watching the lithium price fall over the last eight months and wondering when,” he said.

“The report this morning from UBS sort of called China bottoming out on the lithium price. It has a big implication for not just here in Australia, but the global lithium market.
“It does indicate that at these current prices, people aren’t going to be able to sustainably operate.
“So I think we’ve all sort of known that for some time, and we’ve been waiting for supply to start coming out of the market.”
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Josh Thurlow said supply was starting to come out of the lithium market. Pic: *

Integrated suppliers

Australian miners have also slowed production growth in response to market conditions, with a surge in supply from Chinese-backed lepidolite and petalite mines at home and in Africa coming as EV demand growth slowed in China and especially the US and Europe.
MinRes has delayed expansions to its Wodgina mine in the Pilbara and pulled back on plans to build a third Goldfields processing plant near its Mt Marion and Bald Hill mines.
Yesterday it trimmed costs further, seeking productivity gains by telling FIFO workers they would have to move from 2 weeks on, 2 weeks off shifts to 2 on, 1 off.
Core Lithium (ASX:CXO) shut its marginal Finniss mine in the NT earlier this year, while even the great Greenbushes mine in WA’s South West curtailed production in FY24 as Chinese part-owner and offtaker Tianqi Lithium reduced its concentrate purchases.
But Chinese and African supply, viewed as sitting at the upper end of the cost curve, has remained stubbornly in the market. UBS’ Aussie analysts reporting recently that Zimbabwe would comprise 15% of the lithium raw materials market by 2028, having grown from 0% in 2022 to 9% this year.
They think the breakeven price is between US$500-750/t for spodumene on a 6% Li2O basis at these mines. Spodumene operations outside Greenbushes are believed to require upwards of US$1000/t by contrast.
Benchmark last week saw SC6 prices at US$818/t, a three year low for the price agency and consultancy. Fastmarkets and Platts have reported them even lower in recent weeks, falling into the mid US$700s range.
But Thurlow says even integrated suppliers who can take profits at multiple parts of the supply chain are likely struggling, questioning the efficiency of African mines once logistics costs are taken into account.
“In Australia it’s 16 days shipping. From Africa, 60 days, transport up to 1000km in small trucks compared to Australia, much shorter distances in large trucks,” he told delegates.
“So while mine gate Africa might be competitive, it’s hard to see that from a logistics perspective. So I would start to expect to see even integrated suppliers looking at different alternatives.”
Thurlow’s boss, Perth billionaire Chris Ellison, set tongues wagging on the miner’s financial results call last month, telling analysts, media and investors that ‘no one’ was making money at current lithium prices as he pledged to restrict supply.

Product out of the market

In the UBS note today Han et. al. said the supply cut by CATL in Jianxi would reduce monthly lithium carbonate output in China by 8% or 5000-6000t LCE.
Barrenjoey previously reported that CATL had been nervous running the mine at chemical prices for the electric vehicle battery ingredient of under US$13,000/t.
Benchmark Mineral Intelligence last week posted Chinese lithium carbonate prices of just US$10,352/t, with Fastmarkets reporting prices at US$10,225/t.
But that’s including Chinese taxes. Excluding them Han and the UBS team think price support is sitting at US$8600/t, with CATL’s cash cost sitting at an estimated US$10,968/t excluding taxes or US$12,500/t including VAT.
“We previously believe that CATL would be more tolerant on its loss in lithium business as its focus is likely on its overall battery margin,” UBS analysts said.
“But after making a loss for two months in lithium business and continuous downside risk on lithium price, we finally see normal supply response from marginal-cost producer.”
Is the sky the limit for Aussie miners? It’s probably worth keeping a cool head here.
UBS now sees support at US$9900/t excluding VAT, but says it could be capped at US$10,968/t, given that price could be the trigger for CATL to bring Jianxiawo back online.

Expand

Note the jawboning in the last sentence in an attempt to cap the price rise.
At some stage, that tactic won't work, especially when demand increases and moderated/delayed/suspended operations lead to a supply deficit that won't be so easy to plug.
Their day of reckoning will happen as we know market manipulation preventing free and fair operation eventually has adverse effects. In this case, better quality Lithium projects are being canned and replaced with poor quality high cost operations that won't be capable of keeping up with the required supply growth.

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Last $3.16		Change -0.030(0.94%)		Mkt cap ! $9.516B

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$3.17	$3.19	$3.06	$50.14M	15.97M

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