by Peter Ker Surging lithium exports from Australia will likely drive prices lower over the next six months, according to one of the world's biggest producers of the boom commodity.
The commentary from Chile's Sociedad Quimica y Minera (SQM) echoes predictions made eight months ago by the likes of Roskill and UBS, and comes as two of Australia's biggest lithium stocks Galaxy and Orocobre prepare to publish financial results in coming days.
SQM chief executive Patricio Solminihac said his company had started lithium price negotiations for both the third and fourth quarters of 2018 and both periods seemed likely to have lower prices.
Mr Solminihac said the falling price was nothing to do with demand, which he expected to remain bullish at close to 20 per cent per year as the manufacturers of modern lithium-ion batteries add to the traditional demand from the ceramics and glass industries.
But he said new lithium supply from Australia in the form of spodumene concentrate was set to outpace demand.
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"The market will continue to have more than healthy growth, supply is where there is more uncertainty and we have seen more product coming from Australia going to be converted in China, we have seen more product offered also in China," he told investors on Saturday Australian time.
"Right now we are seeing price pressure because of this additional supply...we see that the price will be slightly lower in the second half."
When quizzed about the magnitude of the lithium price declines expected in the three months to September 30, Mr Solminihac said he expected the price slide to be kept to less than ten per cent of the price received in the three months to June 30.
"At this stage yes, but that can change if something evolves differently," he said.
"It is difficult to give you a number." Australia's largest and longest-standing lithium mine at Greenbushes has been planning further expansions, but the real growth in recent times has come from new players like Galaxy, Mineral Resources, Neometals and Tawana Resources.
Two more lithium mines, operated by Pilbara Minerals and Altura Mining respectively, are currently in the final commissioning stage at Pilgangoora south of Port Hedland, and industry intelligence firm Roskill believes the collective surge in exports could ensure Australia's market share rises as high as 62 per cent of the global lithium market in 2018.
But Australia is not the only place where lithium production is rising; SQM said it would produce 50 per cent more lithium in the second half of 2018 than it did in the six months to June 30, and earlier this year it revealed plans to more than triple lithium output by 2025.
When quizzed about his strategy on Friday, Mr Solminihac vowed that his company would prioritise margins rather than market share.
"Our philosophy is to maximise the long term value of our business, our philosophy is not being the biggest producer ... our philosophy is to make the most money we can for our stakeholders," he said.
SQM's forecast for lithium prices to slide comes after Galaxy reported recently that spot prices for lithium carbonate in China had been falling for six months.
Most ASX listed lithium stocks have lost between 20 per cent and 50 per cent of their value since peaking in the early weeks of 2018, while Galaxy and Orocobre are the third and fourth most shorted stocks on the ASX respectively.
While its flagship assets are located in the high deserts of the Andean mountains, SQM is partnering with Australia's Kidman Resources on its Mt Holland project in Western Australia.
While some believed Mt Holland could be put on the backburner as SQM ramped up production in Chile, the company continues to indicate it is serious about developing Mt Holland swiftly.
"In Australia, we reaffirmed our strong commitment to the Mt Holland project. The time table for delivery remains on track to produce spodumene 2020 and lithium hydroxide in 2021. A major milestone for this project was successfully securing the industrial site for the future refinery where we expect to produce at least 45,000 metric ton of lithium hydroxide per year," said SQM in documents filed in recent days.
Brisbane based company Orocobre is also producing lithium in the Andean deserts of South America, and is expected to give its view on lithium prices when it reports financial results on Tuesday.
UBS expects Orocobre to report a 6 per cent rise in full year profits to $US20.6 million, but does not expect a dividend.
Galaxy Resources will publish half year results on Thursday, with UBS expecting a net profit after tax of $US16.4 million and no dividend.
(20min delay)