Some words from Pilbara Minerals managing director Dale Henderson.
https://www.mining-journal.com/mj-comment/opinion/4168822/lithium-market-sending-confusing-signalsLithium market sending confusing signals. Long-term fundamentals remain intact despite slew of negative news. If recent headlines are to be believed, it's all doom and gloom in the lithium sector.Prices fell by more than 80% last year and have continued to drop so far in 2024.Days into the year, Core Lithium halted mining at its Finniss project in the Northern Territory and paused an expansion. Since then, financiers of developer Liontown Resources' Kathleen Valley project in Western Australia pulled a A$760 million debt funding package due to the outlook for pricing.
Global giant Albemarle Corporation has also cut capital expenditure and sold its stake in Liontown to conserve cash.Even the world's largest and lowest-cost lithium mine, Greenbushes in WA, hasn't been immune to the pricing rout.
On Monday, part-owner IGO announced that after discussions with its joint venture partners Albemarle and Tianqi Lithium, the JV had adjusted pricing mechanisms and reduced guidance.Pilbara Minerals managing director Dale Henderson this week praised the media for its creative lithium and battery market headlines using terms like ‘gone flat' and ‘needs a recharge'."There's a bevy of fantastic headlines so a credit to the press for that," he laughed. Henderson, speaking at the Benchmark Mineral Intelligence World Tour stop in Perth on Monday, admitted it was a "confusing" time for the lithium market, likening it to a rollercoaster."There's a down-dip at the moment but directionally, it's very positive," he said.
Just getting startedBenchmark principal consultant Terry Scarrott reminded delegates at this week's event that the battery revolution was only just getting started.Battery capacity was just 60 gigawatt hours in 2015 but exploded to 1115GWh in 2023.Benchmark is tracking 408 gigafactories, of which 191 are active.
Capacity is forecast to reach about 4000GWh by 2030."It's certainly not going to stop there," Scarrott said.Battery demand is forecast to reach 8 terawatt hours by 2040.Tesla is expanding its Nevada gigafactory to 140GWh, which alone would require 100,000-115,000 tonnes of lithium carbonate equivalent annually, representing about 18.1% of 2022 global supply."There is a gunfight on the horizon," Scarrott said."We're at a cliff edge in terms of raw material supply."Benchmark forecasts US$54.5 billion will need to be invested in the upstream lithium market alone by 2030 to meet demand.Scarrott said the "theme of the decade" would be backwards integration, meaning more direct investment in mines by carmakers."There's an element of catch-up with some of these [Western] these players - less so with Tesla," he said.
DemandMuch has been written about slowing electric vehicle demand.EV growth soared by 60% year-on-year in 2022 and by a further 34% last year.Henderson said EV sales were forecast to rise by 24% in 2024."That's an incredible growth rate even it's somewhat tempered at this time," he said.After EV demand growth of 446% between 2021 and 2023, Benchmark is forecasting further growth of 213% between 2023 and 2030.Benchmark principal analyst Dr Cameron Perks said lithium prices had declined due to lower-than-expected demand.Henderson said Pilbara's customers were unwavering, as evidenced by an expansion of its offtake agreement with Ganfeng Lithium, announced last week."Our customers are looking through the short-term volatility," he said.
SupplyBenchmark had been forecasting a balanced lithium market this year.Perks said the script had been flipped on supply in 2024 due to recent production cuts."We'll be entering a deficit period much sooner than what we forecast in the last quarter," he said.Perks said new projects, including direct lithium extraction and clay, were required to meet longer term demand but the deficits would be exacerbated by a lack of investment at current pricing levels. Pilbara already accounts for 7% of global supply."And we're only halfway up our development curve," Henderson.Pilbara is currently investing more than A$500 million in expanding the capacity of its Pilgangoora operation in WA to 1 million tonnes per annum of spodumene."In almost all scenarios, it makes good sense to carry on with the build-out," Henderson said.He said Pilbara didn't have a specific price figure in mind that would make the company consider pausing the expansion projects or moderating production.He added that boosting production would lower unit costs which would improve margins at current price levels.Pilbara's average realised spodumene price for the December quarter was $1113/t, while its unit operating costs were $416/t free-on-board or $523/t on a cost and freight basis.If Henderson was worried about current prices, he certainly didn't show it."Who knows where pricing goes, but I like the idea of a perfect storm where pricing improves in combination with the new capacity that we've built out," he said."Time will tell."
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