While lithium spot prices are falling from record highs, Lowry says higher contract prices between miners and offtakers mean average prices paid for lithium chemicals in 2023 will average “substantially higher” than in 2022.
“It’s not the spot price where most of the volume is moving, it’s contract price and contract prices are on formulas,” he said.
“In 2022 there were contracts selling less than $10,000 a tonne. Those will come off, they’re gradually rising.
“If you look at the import statistics from Japan, Chinese material was still moving into Japan in February at over US$80,000.
“So when you read this “the sky is falling because the Chinese spot price is low,” there’s almost no volume moving at those prices right now.”
And what many investors may not appreciate is producers could be generating incredible margins at lithium prices far lower than current levels — spot spodumene still rocking at almost US$5000/t after scaling a previously unthinkable US$8000/t last year.
“The aberration of prices going to US$8,000 a tonne has probably surprised a lot of people and is certainly not sustainable for the long term,” Sayona’s Elder said.
“I think prices will correct over time, the question is how long does it take and the speed at which it gets to that level.
“Prices around that (US$2000/t) level are sustainable, which means that producers are making money, the chemical converters are making money and the end use applications like batteries for electric vehicles are priced affordably for end consumers.”
(20min delay)