Lithium prices lift as suppliers exit, Pilbara Minerals boss says
Has the lithium market found its bottom? Pilbara Minerals boss Dale Henderson says the exit of some producers gives an insight into how the market is developing.
Pilbara Minerals boss Dale Henderson says the company has seen a strong uplift in lithium pricing in recent months as some producers left the market, but says it is too early to call a sustained recovery in commodity pricing.
Pilbara received an average price of $US804 a tonne for its lithium concentrate in the March quarter, but Mr Henderson said pricing had strengthened across the period and continued to do so.
“The challenge is that the fundamentals underneath demand are evolving rapidly. So that makes any forecasting very difficult,” he said.
“I think we can take some confidence around what we’re seeing with the supply aspect, with the March quarter indicators of supply curtailment. A number of the Australian operators talk about moderating levels and some of the Chinese suppliers came out of the market based on what we think is pricing, but also some with environmental challenges.”
While Mr Henderson said the lithium supply chain was still evolving, he said the dramatic falls in pricing in the December quarter, followed by supply curtailments, were a good indication of how swing supply was likely to operate in the market in the future.
“So I think we have more confidence around price support moving forward,” he said.
The Pilbara Minerals boss told analysts on Friday the company had seen a 27 per cent lift in lithium pricing over the last two months, based on an average across five price-reporting agencies.
Pilbara Minerals auctioned a single shipment of its Pilbara concentrate grading 5.5 per cent lithium for $US1106 a tonne during the quarter.
The company lifted lithium output and boosted sales in the March quarter, but a 28 per cent drop in prices amid demand pullbacks weighed on revenues. Performance in the first half of the quarter was impacted by weather events and ore supply challenges that the company said were now resolved.
The group produced 179,000 dry metric tonnes of spodumene concentrate and sold 165,100 tonnes – both lower than the numbers in the December quarter – at an average realised price of $US804 per tonne, compared to $US1113 per tonne in the previous quarter.
It booked revenue from sales of $225m in the quarter, but much of that was wiped out due to pricing adjustment to customers in the December quarter as lithium prices tumbled, which resulted in customer credits of about $218m, meaning Pilbara Minerals took only $7m of cash through the door in the period.
Pilbara Minerals burned through $362m in the quarter as it pushed ahead with capital spending required to lift its total annual output to a million tonnes of concentrate a year, and on downstream joint ventures with Calix in the Pilbara and POSCO in Korea.
Pilbara Minerals hopes to produce an enriched lithium salt midstream product using Calix technology in Australia, and has a share in a 43,000-tonne-a-year lithium refinery with POSCO.
The company said POSCO had completed commissioning the refinery’s first train in the March quarter, with production now ramping up. Commercial sales will begin when customers have certified the quality of the plants output, the company said, a process likely to take six to 12 months.
Pilbara Minerals shares closed down 2.3 per cent at $3.83 on Friday.