FOCUS: Tight availability propels spodumene price, prompts more frequent price negotiations

The spodumene price skyrocketed in July with tight availability posting challenges to lithium operations in China, while suppliers intended to negotiate the price more frequently in light of the price rally in the downstream chemical market.

Fastmarkets’ monthly assessment for spodumene 6% Li2O min, cif China rose to $880-950 per tonne on Wednesday June 30, up by $195 per tonne from $690-750 per tonne one month ago. The price has more than doubled since January 2021.

Key Chinese producers of battery-grade lithium hydroxide, which is typically fed on spodumene concentrates, have battled with tight raw material supply amid robust downstream electric vehicle (EV) battery demand, which has resulted in aggressive ramp-up plans among cathode materials producers.

Global demand of lithium should reach 426,000 tonnes of lithium carbonate equivalent in 2021, which is a 30% increase from 320,000 tonnes in 2020; supply of processed lithium is estimated to only increase by 13% year on year, according to Fastmarkets’ battery raw materials research team.

The spot market has responded quickly to the optimism in the EV battery supply chain dynamics with lithium prices across the globe making notable gains in the first half of the year.

The strongest performance was in the seaborne Asian battery-grade lithium carbonate and domestic Chinese battery-grade lithium hydroxide market, with the spot price for the former edging up by 107% in the first six months of 2021, and for the latter rising 121% in the same period, according to Fastmarkets’ data.

Fastmarkets’ assessment of lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea was $14-15 per kg on July 29, up by 3.57% from $13.5-14.5 per kg one week ago.

Fastmarkets’ assessment for the lithium hydroxide monohydrate, 56.5% LiOH.H2O min, battery grade, spot price range, exw domestic China moved up to 100,000-108,000 yuan ($15,470-16,707) per tonne on July 29, up by 6.12% month on month from 97,000-99,000 yuan per tonne.

More frequent price negotiations, emerging spot market
Spodumene suppliers have increased the negotiation frequency of sales prices to keep them in line with the strong downstream chemical market.

“We negotiate the contractual prices with our customers on a monthly basis now, while we always did negotiations on a quarterly or even semi-annual basis,” a distributor said.

“We don’t want to lag behind the price rally of lithium chemicals,” the source added.

Meanwhile, leading miners have started to hold spot spodumene auctions, with some attempting to discover the true market value of the lithium feedstock in light of the disconnect between offtake prices and those in the emerging spot market.

Australian miner Galaxy said during a press briefing that it held an auction in the second half of July and received a number of bids at $900 per tonne at cif China basis. The company hasn’t disclosed the highest bid or details of subsequent business.

Pilbara Minerals also held its inaugural auction of spodumene concentrates on its Battery Material Exchange (BMX) on July 29, one day after Fastmarkets published its monthly spodumene assessment in July. The highest bid reached $1,250 per tonne, at fob port Hedand basis, for 10,000 tonnes of SC5.5 units.

“In Pilbara Minerals’ view, it is now clear that there is currently a disconnect between longer dated spodumene offtake pricing outcomes which reference lithium chemical pricing inputs, compared to the emerging ‘spodumene spot sales market’,” the company said in its quarterly activity report on July 28.

“There is a lot of demand for spot parcels but supply is very tight, possibly at least $100 per tonne premium for spot transactions from current off-take agreements,” a supplier said.

“The spodumene market for conversion in China is short and as such they are foregoing their margin to pay for extra spodumene. Has been developing over the last couple of months and now becoming more acute, representing a fundamental shift in the market,” a second supplier said.

“Altura was taken out of production and the other spodumene players were moderating their production [and therefore] there was a gap in the market for spodumene supply and demand. Now that part of this [lost] production is back online, spodumene producers are trying to maximize the price [by] utilizing tenders,” a consumer noted.

On June 25, Pilbara Minerals announced a staged restart at the Ngungaju lithium project in December quarter in 2021. The miner completed the acquisition of the Altura Lithium in January 2021, thereby becoming the 100% owner of Altura’s Pilgangoora lithium project, which was rrenamed Ngungaju. The project has been on care and maintenance since late October 2020.

Converters in China not likely to fill the gap

With the spodumene tightness, which is estimated to last throughout the second half of 2021, some market participants are considering converting battery-grade lithium hydroxide from technical-grade lithium carbonate.

This also partially contributed to the recent turnaround of the technical-grade lithium carbonate price in China.

Some market sources have doubted the extent to which such practices materially eased supply constraints of feedstock for lithium hydroxide producers in China.

Some market sources pointed out that there are only a few refineries in China that can take tolling business to process technical-grade lithium carbonate into battery-grade lithium hydroxide and those refineries are already running at full capacity, and therefore they are unlikely to digest more technical-grade units.

In addition, producer sources flagged the consistency in feedstock which contributes to the consistency of specifications and quality of cathode materials.

“For cathode materials producers, consistency of quality of lithium hydroxide is on top of everything, while it is easiest to achieve this by using units produced from spodumene,” a producer source said.

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