USB Global Research 20 June 2025 Lithium Depressed… and further...

USB Global Research 20 June 2025
Lithium
Depressed… and further to go
It needs to get worse before it gets better
As we preview the June Q production and price outlook ahead, spot prices remain sub
US$600/t and markets remain oversupplied. JV structures, the integration of partners
and strong balance sheets has meant the standard supply response from producers has
taken longer to play out amid weak prices. We believe that consensus pricing and
equities are still too high. The path forward for some may become a little clearer with
upcoming FY26 guidance but, for now, our forecasts remain broadly unchanged and we
stay underweight in the sector, seeing an extended period of low prices ahead of further
supply cuts. We maintain our Sell ratings on IGO (PT $3.60/sh), LTR (PT A$0.50/sh),
PLS (PT A$1.10/sh), with a Neutral rating on MIN (PT A$25.70/sh) and Buy rating on the
longer dated, developer PMT (PT A$0.33/sh/C$2.90/sh).
Tough markets
Having been underweight the sector for ~2 years, we have been itching to upgrade, but
our latest sector deep dive APAC Focus: Lithium Lows signalled a likely prolonged phase
of oversupply and depressed prices, highlighting two key points: 1) despite prices
trading into the cost curve, the cost curve continues to flatten and widen, and; 2)
incentive prices have fallen further to US$1,200/t SC6 due to reduced EV demand (cut
our 2020 EV demand forecast by 16%).
FY26 Guidance- belt tightening but no material changes yet?
The main difference to Australian FY25 exit run rates is from Greenbushes, where we
expect some additional tonnes in 2H FY26 (+220kt yoy) from CGP3. We forecast
Greenbushes (100%) production of 1.7mt SC6 in FY26 at an AISC of ~US$300/t (vs
realised price of ~US$650/t). For PLS, we assume Ngangaju remains on care and
maintenance and Pilgangoora continues on the P850 setting for 860kt SC5.3 and
AISC of ~US$525/t (vs realised price of ~US$600/t). We note FY25 brought higher
investment in growth, mine development and infrastructure (adding more than US$500/
t AIC), which we expect to revert to more normal levels in FY26 (-50% yoy). Regarding
LTR, we model FY26 production of 466kt SC5.2 at AISC of ~US$630/t (vs. realised price
of ~US$600/t) during this transitional year when the FORD debt repayments start. On
MIN's production, we forecast a minor pullback in output at Mt Marion, with FOB costs
remaining largely flat, and Wodgina production edging up to 550kt in FY26.
June Q results to highlight where we are in the cycle
Per the below table, we are broadly expecting assets to outperform production-wise
compared to consensus, whilst being below the street on realised prices. We expect the
market to focus on balance sheets and (lack of) cashflow.