Monsters of Rock: As lithium losses mount, waiting continues for market turnaround

There have been some signs of improving Chinese demand for lithium, an analyst says, as miners report big losses.

Josh Chiat

4 min read

February 21, 2025 - 12:57PM

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It's the waiting that kills you. Pic: Getty Images

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Lithium miners take a dive as losses mount
But analysts see green shoots for demand
Glencore sees coal rebound as it mulls managing thermal supply to support pricing

Look across the ASX at miners linked to both new and old energy markets, and the February reporting season has been a tough one.

Three lithium producers – Mineral Resources (ASX:MIN), Pilbara Minerals (ASX:PLS) and IGO (ASX:IGO) – reported cumulative after tax losses of over $1bn for the first half of 2025, IGO making up the bulk of those thanks to a +$500m impairment on its misfiring 49% owned Kwinana lithium refinery.

Canaccord Genuity's Tim Hoff estimates that project, 51% owned by IGO's Greenbushes JV partner Tianqi, could need US$22,500/t lithium hydroxide to breakeven according to a note. Currently Fastmarkets has them sitting a little over US$9000/t.

Separately US-based Piedmont Lithium (ASX:PLL) reported a US$64.8m net loss on Friday for 2024, with its soon to be merged partner Sayona Mining (ASX:SYA), operator of North American Lithium in Quebec, to report next week.

Spodumene concentrate mines like Greenbushes, Wodgina and Pilgangoora are still generating cash at these prices, though not much, with current spot levels around US$890/t.

But there are signs the market is unlikely to fall further, with prices trundling along at these levels for the bulk of the last six months, and miners like PLS and MIN pulling back production to wait for the next uptick in demand.

Euroz Hartleys analyst Trent Barnett, in a short note on Pilbara Minerals, suggested the market was now at a bottom and waiting for that next leg in the demand cycle, with key end market electric vehicle production growing 18% last year, led by China. It has a $2.83 PT on PLS, cutting back from a more bullish $3.50 this week.

But maintains a buy, with few analysts valuing PLS on spot ($1 on the US$815/t spot price assessed by Euroz).

"There are indications we are near the bottom of the lithium cycle. There are anecdotes of substantial increases in China demand, which historically has been the only near term leading indicator of the lithium cycle, in our view," Barnett said.

"The real catalyst that will kick the lithium cycle up again though will be a solution that allows for manufacturing/sales of EVs at scale in the USA.

"Allowing China investment into USA would be the most obvious catalyst. Without it, the USA will need to replicate all the R&D that China has already achieved for the manufacture of low cost EVs, and that will take a lot of time, investment and risk that could all be a waste quickly if at any time China is allowed to invest."

Coal miners eye turnaround

Much of the retail market has focused its attention on lithium and the falling profits of Australia's iron ore giants – Fortescue (ASX:FMG) delivered its weakest half-year result since 2019 for one.

Conditions could be getting more bullish for coal miners though, who have spent the past year dealing with production issues and weaker prices, faltering off the back of a historic boom through 2022 and 2023.

Yancoal Australia (ASX:YAL) delighted investors after overnight declaring a $687 million final dividend at 52c a share, paying out 56% of its $1.2bn after tax profit.

That came despite falling thermal coal pricing sending NPAT 38% lower YoY from 2023 to 2024.

The majority Chinese owned operator had previously suspended payouts to keep its powder dry for a potential acquisition, having made an unsuccessful play for Anglo American's Queensland coal mines.

YAL shares rose 7.7%, coming hot on the heels of Whitehaven Coal's (ASX:WHC) decision to revive its buyback promising to return $144m to shareholders in divvies and buybacks over the next six months.

There could be more support coming for both seaborne met and thermal coal prices as supply-side issues remain, according to Glencore's Gary Nagle.

He spoke to analysts after delivering the miner and trading house's recent full year results this week, saying underinvestment in steelmaking coal means prices could lift despite a weak Chinese steel market.

"Nobody is really expanding. There is not much expansion. You have got Grosvenor that’s closed. Australia is – (BHP CEO) Mike (Henry) has been quite vocal about not spending more money on BMA because of some of the history around Queensland. So, there is no expansion in BMA," Nagle said.

"We are not expanding in EVR. There is very little other supply side ability to supply – response or respond on the supply side. The North American market are high cost or I would say North America, more the U.S. market is high cost, and we probably will see some of those tons come out of the market in the current environment.

"So, I think the upside from here in steelmaking coal is good."

In thermal coal, Nagle said a number of operations were losing money at current prices, which have sunk as low as US$103.50/t. He

"We are happy to reduce our own production. And I have mentioned in our presentation that we will take – likely to take concrete actions in terms of supply response on our side to help contribute towards balancing that market," he said.

"There are operations already now, which are at the cost curve or the cost curve is above the current pricing, and it will be struggling at these prices.

"So, we expect – we will take proactive action. We are all cash positive across the board, but there are operations that I believe with time, will come out of the market as well at these kind of prices, so that will give us an opportunity for prices to recover."

Having been revealed to have had discussions with Rio Tinto, which exited coal close to a decade ago, Nagle said the company's decision to keep its coal assets rather than spin them out would not be an impediment to large M&A, saying "the pendulum has swung back", coal is being recognised as required amid the energy transition and that the "extremism of anti-coal has come out".