An interesting article from the AFR - well worth a read. Prediction of S>D may be a bit off if EV demand increases as we suspect/hope.
Lithium wave near peak as Australian exports soar.
Lithium prices will peak in 2018 as a wave of new supply from Australian mines outstrips short-term demand, according to business intelligence firm Roskill.
Australian miners have been the fastest responders to recent rises in lithium prices amid optimism around demand for lithium-ion batteries, and at least three more Australian mines are expected to start exporting lithium-rich spodumene in 2018.
Roskill managing director Robert Baylis said the flurry of new mines risked swamping a market that was still small despite its growing profile.
"The big issue is this wave of spodumene supply from Australia, where is it going to get processed and what is going to happen in terms of competition between producers?" he said.
"There is too much coming too quickly ... the mine production of spodumene concentrate is outgrowing demand quite significantly."
The world's biggest spodumene mine has operated near Greenbushes in Western Australia since the 1980s, and exports from that mine were joined in early 2017 by Galaxy's Mt Cattlin mine and the Mt Marion mine owned by Mineral Resources, Neometals and Ganfeng.
Spodumene exports from WA's southern ports duly rose 84 per cent between fiscal 2014 and fiscal 2017.
Mineral Resources started exporting spodumene from Port Hedland in April, and monthly exports had more than quadrupled by the time the company shipped 517,000 tonnes of the material in December.
Three more mines will start exporting from WA within the next six months; Tawana Resources has the Bald Hill mine near Kambalda while Pilbara Minerals and Altura Mining will each open a new mine at Pilgangoora in the Pilbara region.
Oversupply situation
Traditionally sold to ceramics and glass manufacturers, spodumene is increasingly being beneficiated into lithium hydroxide or lithium carbonate for use in batteries, and Mr Baylis said those beneficiation plants were currently the bottleneck.
"There is a hell of a lot of mined product floating around which is yet to have been converted into finished product, and the issue is going forward that is only going to increase because ... so an oversupply situation in 2017 is going to increase even further in 2018 and 2019," he said.
"The levels of demand growth to support the mine capacity being built will come, but it is not going to come in 2018 and 2019, it is going to come in three to five years time, so the question is can these operations maintain production if they can't sell a significant proportion of capacity?"
Mr Baylis said Australian miners would be somewhat protected by the fact that spodumene was typically priced with reference to the beneficiated product, which remains in tight supply.
"We expect to see a low double-digit increase in refined [lithium] pricing in 2018, and that we think will be the peak unless something significant happens; either higher demand or some impact on supply," he said.
"How quickly the price falls is difficult to know, it is a market that is very tightly controlled so of course, unless there is a big increase in competition you are unlikely to see the price collapse, but the price might gradually reduce."
Similar forecasts
Roskill's forecasts are broadly similar to those
recently published by UBS, which expects spot lithium carbonate prices in China to average $US20,250 per tonne in 2018 before drifting lower to $US11,625 per tonne by 2021.
They come as rival business intelligence group CRU predicted a surplus of cobalt, another commodity enjoying boom prices on the back of the battery thematic, in 2018 on the back of a restart at Glencore's Katanga mine in Africa.
Tawana expects first exports from Bald Hills in April, and managing director Mark Calderwood said most Australian spodumene mines had been funded by lithium consumers rather than banks, which ensured output would be relatively well matched to supply.
"Unlike a lot of other commodities, a lot of these mines are fully committed well before they come into production ... the banks are not funding these mines very much," he said.
"There is a fair bit of production coming on but it is all spoken for, it is not like there is going to be production hitting the short-term markets, it's contracted and on fairly long terms."
Spot prices most vulnerable
Mr Calderwood said 100 per cent of Tawana's concentrate was already contracted for the first two years of production, and investors needed to separate gyrations in the spot market from the more stable contract market.
"There might be a peak on the spot terms, but in terms of contractual pricing I don't see a lot of change over the next five years, I would imagine prices will stay reasonably steady," he said.
Mr Baylis agreed that spot markets were most vulnerable to price slides.
"For contract pricing you wouldn't expect prices to fall hugely, it is more going to be the spot prices that you will see tumble first," he said.
Mr Calderwood said he could have easily sold more if the Bald Hills mine were capable of producing it.
"They are keen for 50 per cent more than we can produce, and we have been harassed by other people that missed out, there are a lot of people who missed out on supply," he said
Read more:
http://www.copyright link/business/mining/...an-exports-soar-20180115-h0ihps#ixzz54HuOBvnI
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