Spodumene mined from hard rock in Western Australia is a feedstock material used in the production of lithium chemicals that go into batteries for electric vehicles (EVs). Most of the spodumene mined in Western Australia is shipped in China where it is converted in lithium chemicals.
Oversupply of lithium salts and subsequent price falls caused the upstream spodumene 5-6% Li2O min, cif China price to tumble over the past two years from $870-950 per tonne in January 2018 to $370-400 per tonne in the latest monthly assessment on September 30, 2020.
Lithium capacity expansion in response to surging prices for lithium over 2016 and 2017 meant supply outstripped demand growth between 2018 and 2019, triggering a slump in global prices.
The effect of the Covid-19 global pandemic on end-sector demand added further bearish pressure to lithium prices over the first half of 2020.
Spodumene is mined and crushed to form a concentrate. This mineral concentrate is then sold to chemical companies that use the feedstock to produce lithium chemicals. As a result, spodumene pricing patterns are traditionally linked to the performance of lithium chemicals prices.
Domestic lithium battery-grade prices in China halted losses over the past two months. Fastmarkets' lithium carbonate 99.5% Li2CO3 min, battery grade, spot price range exw domestic China stood at 37,000-41,000 yuan ($5,448-6,037) per tonne on Thursday October 1, unchanged over the past 13 weeks.
Similarly, the spodumene price halted its fall in August due to a relative firm market for lithium carbonate in China’s domestic market supported by slightly improved downstream demand from cathode makers.
Although stocks have decreased due to rising demand in recent three months, the overall supply of lithium and spodumene remains sufficient, market participants said.
“We still have stock of spodumene on hand and are in no hurry to buy more. As for next year’s procurement, this is currently under negotiation but not settled yet,” a converter told Fastmarkets.
“Recently, China’s lithium carbonate prices firmed and most producers insisted on higher offers with better expectations for fourth-quarter demand. Supported by this round of firm pricing, spodumene prices did not decrease further this month and I do not hear much lower prices this month,” a second converter said.
Yet, spodumene consumers said high stocks of spodumene will cap a rise in the raw material price.
“Currently some market participants are also holding optimistic attitudes on the spodumene market for next year and are expecting higher prices, but others are still cautious as current stocks of spodumene are still high,” a cathode maker said.
“I don’t think lithium and spodumene prices could increase in a large range as stocks are still quite plentiful, especially for spodumene, which can support [production] for several months. I think prices would be stable in the rest of this year,” a second buyer said.
On the supply side, sources told Fastmarkets a significant amount of spodumene inventory has built up in China.
“I think the majority of the materials have been shipped by [spodumene] miners under agreements with converters that were not performed... To consumed it may take three to four months minimum,” a source active in China said.
On the other hand, some spodumene producers hold an optimistic view on the change in direction for prices.
A spodumene source active in Western Australia said: “With respect to spodumene demand, we have seen a material uptick in the past two months which will result in stronger sales and shipments in the fourth quarter [of 2020]. Engagement with customers has improved and it is easier to establish shipping schedules, progress contracts, etc… Still has not translated to [a spodumene] price [increases], however intuitively the next movement should be up.”
A second spodumene producer said: ”We’ve definitely seen a turn in pricing, I think the second quarter of this year was the bottom for spodumene 6% Li2O prices, we are below cost and it is not sustainable.”
Speaking of the build-up of spodumene inventory at Chinese ports and Chinese converters’ plants the same producer said: "I imagine most inventory being sold was more out of cashflow necessity rather than reflective of where the market needs to be. “
Spodumene export growth
Data released by the Western Australia Southern Ports Authority show total spodumene concentrate shipped from Western Australia ports stood at 1,227,089 tonnes for financial year 2020 ended June 30, up around 4% year on year despite challenging market conditions caused by the Covid-19 pandemic. The biggest jump in spodumene exports was recorded in financial year 2019 when new miners commenced operations.
“It looks like many aspects of the lithium market are bottoming out and with spot prices well into the marginal cost curve, the low prices are unsustainable. Surplus spodumene stocks in China are likely to cap prices for a while longer, but given a recovery in demand for EVs in China and strong growth in Europe, combined with EV manufacturers increasing production rates, all suggests that demand will recover quickly, which is something the market has badly needed," William Adams, head of battery raw materials research at Fastmarkets, said.
“This demand recovery may encourage consumers to run with more stock and in addition, as EV production numbers increase, the middle part of the supply chain will need to start new production lines and that will require a build-up of working stock,” he added.
Following a market consultation, Fastmarkets recently amended the specifications of its spodumene min.6% Li2O cif China price assessment and discontinued its fob Australia and 7-7.5% cif China prices to better reflect emerging norms in the spodumene market that serve the lithium battery-grade chemicals industry.
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The spodumene price cif China halted its multi-month downtrend at the end of September after customer inquiries for spodumene sourced from Western Australia increased, and sources told Fastmarkets they expect further rises.