Albemarle improves auction sale price but lithiumoutlook is getting gloomier as supply piles up

AdrianRausoThe West Australian

Wed, 5 June 2024 8:00PM

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AdrianRauso

China’s supply stream of the lithiumneeded to feed its battery manufacturing network is swelling Credit:Talison Lithium/TheWest

Dark clouds are reappearing over Western Australia’s lithium miners just as it appeared the storm had been weathered.

US giant Albemarle, which has a major lithium presence in WA, last week purportedly auctioned off 16,000 tonnes of spodumene concentrate for $US1210 ($1818) a tonne.

This price excludes taxes, The West Australian understands, and is based on a 6 per cent grade spodumene concentrate product being exported to China.

The sale was an improvement — albeit marginally — from the $US1195/t Albemarle fetched for an equivalent 10,000t of spodumene sold via auction in March.

The latest auction also seemingly marked another step towards amarket recovery for the battery ingredient, which slipped below$US900/t in January following a sustained slide.

But clear skies on the horizon are looking increasingly unlikely,according to recent analysis.

China’s supply stream of the lithium needed to feed its batterymanufacturing network is swelling, even from sources within its ownbackyard.

UBS told clients on Wednesday it recently hosted a call with S&PGlobal Platts to see how traders and price reporters are seeing thelithium market.

Traders and price reporters play a pivotal role in gauging thestate of the lithium market, which is notoriously opaque and lacks acentralised trading platform unlike many other commodities.

“Overall their feedback was incrementally bearish short-termprices with weak demand, robust supply growth and lower costsupport,” UBS said.

Stockpiles of African spodumene and Chinese lepidolite are growingstrongly in-line with expectations, UBS said, which could spell badnews for Australia’s spodumene producers.

“We forecast lithium prices to trade range-bound near term withspodumene expected $US1000 to $US1200/t for the remainder of the yearversus spot $US1160/t and consensus of approximately $US1230/t.”

Most Australian lithium mines, which are almost all located in WA,would either be losing money or barely scraping past breakeven ifprices slump back to $US1000/t.

Australia is currently responsible for about 55 per cent ofChina’s spodumene imports, which has been a relatively staticportion since the start of the year. Virtually all of Australia’slithium exports are shipped to the Middle Kingdom.

But Brazil and Zimbabwe are set to grow their slice of the Chinasupply pie, according to UBS, and in a research note last month Citihighlighted that Canada is bursting onto the scene as a majorexporter faster than anticipated.

Citi also believes the supply glut is flowing through downstream,which offers another forward-looking indicator for WA’s lithiumplayers.

“Our channel check with ZE Consulting suggests that lithiumshould see a elevated oversupply (for May),” Citi said in aresearch note late last month.

“Yichun Mining completed its auction . . . the first timeChinese lithium smelters held (an) auction for lithium carbonate,indicating a sluggish spot market.”

On the same day the March Albemarle auction cleared, MineralResources chief executive Joshua Thurlow said his company had“recently” sold spodumene concentrate at $US1300/t.

Meanwhile, Pilbara Minerals chief Dale Henderson told The West inApril that the price range for spodumene was sitting between $US1000and $US1300/t, depending on which buyer was at the other end of thephone.