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But the price volatility observed in 2023 and so far this year has had an impact on the pace of production expansion of certain projects, CEO Sean Sargent told Fastmarkets on the sidelines of the International Energy Week held in London on February 27-29.
“As a privately owned company, we are far less susceptible to the volatility in the stock markets that low lithium prices are causing for some of our listed counterparts,” Sargent told Fastmarkets.
“While lithium price volatility doesn’t help the bankability of large infrastructure projects – which often rely on contracted revenues to secure debt – investors do have a better understanding of the longer-term lithium market than they did just a few years ago,” he added.
“There is much more certainty around the huge long-term demand for lithium chemicals, and there’s an appreciation that the Chinese-dominated market of today might not reflect what will ultimately be happening in a growing European market in the future,” Sargent said.
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In many ways, lithium is still considered an emerging market and one that is no stranger to volatility and price cycles, several market participants said.
The downturn in prices has led several producers to embark on major cost-cutting reviews, which included deferring projects or curtailing capacity.
Prices for spodumene – which is a feedstock derived from hard rock for lithium chemical production – have fallen by around 84% since March 2023. This trend is similarly reflected in the spot benchmark prices for battery-grade lithium hydroxide and lithium carbonate in seaborne Asia.
Fastmarkets’ price assessment for spodumene min 6% Li2O, spot price, cif China was $900-1,050 per tonne on Wednesday March 6, down by 84.15% from $5,800-6,500 per tonne on March 2, 2023.
Prices for lithium hydroxide and lithium carbonate on a CIF China, Japan and South Korea (CJK) basis fell by more than 80% throughout 2023 and into 2024 after reaching record highs in 2022.
Fastmarkets’ price assessment for lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price cif China, Japan & Korea was $12.50-14.00 per kg on Friday March 8, down by 84.13% from $83.00-84.00 per kg on January 3, 2023.
And Fastmarkets’ price assessment for lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea was $12.40-14.00 per kg on Friday, down by 83.29% from $78.00-80.00 per kg on January 3, 2023.
Green Lithium is set to build a large-scale lithium refinery plant at Teesport in Teesside, UK. The start-up goal is to meet the needs of the battery manufacturing and automotive sectors in the UK and Europe primarily, according to the company.
Once operational, Green Lithium expects the refinery to provide annual output of 50,000 tonnes of battery-grade lithium hydroxide to feed the nascent supply chain of lithium-ion batteries in Europe.
Sargent commented on the challenges to acquire the critical feedstock for running the refinery – such as hard rock spodumene – from international suppliers in such a volatile price environment across the lithium complex.
He also mentioned the different commercial models that can help reduce exposure to price fluctuations.
“For example, tolling, [where a refinery is paid a fixed processing fee on behalf of a counterparty who has secured the raw material],” Sargent said. “Linkage rates [between the chemical and raw material prices] can be used to provide a built-in hedge against volatility.”
“Floor and ceiling prices can also provide protection against the worst extremes of volatile prices,” he added. “And of course, for a fee, commodity traders can play an integral role by guaranteeing supplies of raw materials or marketing the products, helping new projects secure the revenue they need to secure debt.”
Traders have built up their presence in the lithium market in recent years; they were attracted by soaring prices in 2022 and saw an opportunity in lower prices last year.
Most industry participants still expect to take advantage of an expected long-term growth in lithium demand spurred by the global energy transition, Fastmarkets understands.
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