MySteel predicts spodumene price to drop below US$1400/t in...

MySteel predicts spodumene price to drop below US$1400/t in 2024Westgold rings Big Bell on expansion at Murchison gold mineLithium, gold, iron ore stocks lead materials sector higher in morning tradeLithium has had a volatile and complex 2023.Interest in speccy junior lithium equities remains bullish on long-term demand forecasts and the desperation of major players to stamp their foot on any potential source of future supply like they’re standing on the tail of a cartoon dog.Or tentacles, in the case of Gina Rinehart and Chris Ellison, who now have stakes in all bar five of WA’s 14 spodumene deposits.At the same time, Australia’s producers have been grappling with prices falling from last year’s unthinkable highs of US$80,000/t+ for chemicals and US$8000/t+ for their 6% (or less) lithium concentrate.Chinese lithium carbonate and hydroxide prices have tumbled more than three quarters though on a classic case of oversupply and paper speculation. Having breathed and recovered mid-year, they are now less than US$20,000/t.That has seen spodumene prices correct to US$1590/t last week according to Fastmarkets. They would remain highly profitable for Aussie producers, though there’s plenty of reflection going on around what seemed not too long ago to be an unstoppable juggernaut of an industry.The world’s largest lithium mine Greenbushes could curb plans to expand output to 1.5Mtpa this financial year with one of its owners and offtakers, China’s Tianqi, not keen to take its full allotment of concentrate.Are we at a bottom, a buying opportunity for the electric vehicle powered Elon Musk huffing bulls out there? Or is there more water to run under this bridge before prices stabilise?In a note on Monday, Chinese industry monitor MySteel moved in lockstep with lithium persona non grata Goldman Sachs, predicting prices would head below US$1400/t in 2024.MySteel senior editor Aggie Hu said rising supply from Africa, as well as low cost brines in Chile and China, would impact the balance of the sector.Chinese lithium producers are also moving to introduce transaction terms that don’t expose them to the mismatches between spodumene and chemical prices which caused big losses in previous quarters, trying to shift from past quarter contract pricing to forward month pricing from late next year.“The latest pricing method, M+1 or M+2, means that the lithium ore prices are settled based on the average lithium carbonate price in the next month or month after next,” Hu said.“In this case, the smelters are able to mitigate the risks stemming from falling lithium carbonate prices, as the production cost drops along with falling lithium carbonate prices. However, the smelters will also give up the profits allowed by rebounding lithium carbonate prices.“Generally, the lithium mines may surrender certain profits to benefit the downstream smelters amid times of difficult (sic). But the mines are still relatively tough, hence only Pilbara has accepted the new pricing method of M+1 up to now, and the rest are under negotiation.”