Major lithium miners push for a more reliable spot price
Elouise FowlerReporter
May 23, 2024 – 1.43pm
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Australia’s leading lithium miners want to establish a “coalition of the willing” to set up a trading exchange in a bid to stop price volatility and make the commodity more attractive to commercial bank financing.
Huge demand from batteries and electric vehicles has turbocharged the nascent industry in Australia, but the structure of the market – where many investors feed mine output to their refineries – means very little lithium is traded on the spot market.
That means prices for lithium spodumene concentrate, the ore Australia mines and largely sends to China for processing, violently swings around based on single trades and minimal price disclosure in the market.
Lithium industry finds common goal to reduce price volatility: Dale Henderson, CEO of Pilbara Minerals, Joshua Thurlow, of Mineral Resources, and Cameron Perks, of Benchmark Mineral Intelligence at the Mining Summit in Perth this week. Ross Swanborough
“I think all of the industry participants struggle with this challenge given that the market is inefficient, and I think we’ll all be better served through pulling together and try and resolve it,” said Dale Henderson, chief executive of Pilbara Minerals.
“I think what flows from that will ultimately be more stability, and then that will enable financing, and all those other sorts of benefits, and hopefully over time take out some of the volatility we’ve been experiencing.”
RELATED QUOTESPLSPilbara Minerals$4.000 -1.48%
1 year1 dayMay 23Aug 23Nov 23May 243.0003.6004.2004.8005.400
Updated: May 23, 2024 – 6.57pm. Data is 20 mins delayed.
View PLS related articles MINMineral Resources$76.730 -2.17%
May 23Aug 23Nov 23May 2452.50060.00067.50075.00082.500
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Joshua Thurlow, chief executive of Mineral Resources’ lithium business, said the miner was “exploring everything” to develop price transparency. But he added the thin volumes would make an exchange difficult.
“We saw it happen exactly the same way with iron ore, where industry players led it, they got together, they effectively built that exchange-style market,” he said.
“[That involved] pre-qualified buyers, pre-qualified sellers, and it was successful for them to create genuine price transparency.”
Mr Henderson and Mr Thurlow were speaking at The Australian Financial Review Mining Summit in Perth on Wednesday.
Mr Thurlow said the challenge was a lack of volume on the spot market, with mine output often fed into integrated supply chains, or product was stitched up in offtake agreements.
“The challenge might be in the short term to get enough spot volume to put on to an exchange to make that happen,” he said. “If you get volumes, you still end up with a pretty lumpy data set that comes out.”
MinRes will begin selling lithium on an auction platform this year after fetching a much higher premium for a sale than the prevailing spot price for the battery-making material.
When prices started to fall in October, MinRes claimed markets were being manipulated to suppress prices in a sector dominated by battery chemical makers in China.
The comments came after the Guangzhou Futures Exchange started offering futures contracts on lithium carbonate supply in mid-2023. Some market participants said the Guangzhou futures had been a factor in undermining sentiment around prices.
Meanwhile, Albemarle, the world’s largest lithium supplier, has held a series of auctions since March. The emergence of the auctions – ASX-listed Pilbara Minerals has also made similar sales – and a more reliable spot price echoes similar developments decades ago in iron ore trading. Then, it was BHP pushing to end a decades-old system of negotiating benchmark prices every year in favour of a spot price which now underpins the market.
But Cameron Perks, of Benchmark Mineral Intelligence, said a lithium exchange could be difficult.
He said there were problems turning lithium into a commodity partly because refiners in China would want to hold on to their pricing powers. Most lithium refiners in China own portions of mines to feed their refineries.
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