Miner Orocobre signs lithium supply MoU with Toyota-Panasonic JV

Orocobre has signed a Memorandum of Understanding (MoU) with Prime Planet Energy Solutions (PPES) for the long-term supply of battery-grade lithium carbonate and hydroxide, the Australia-based lithium miner said on Friday August 28.

The MoU entails the supply of as much as 30,000 tonnes of lithium carbonate equivalent (LCE), starting from 2021, for use in PPES’ battery production supply chain. PPES is a joint venture between Japanese giants Toyota and Panasonic to make batteries for the automotive industry.

The majority of the LCE supplied will be in the form of lithium hydroxide from a conversion plant at Naraha and future expansion of this asset. The Naraha plant in eastern Japan, north of Tokyo, will process lithium carbonate feedstock from the Olaroz lithium facility in north-west Argentina, Orocobre said.

A pricing framework has yet to be established and was expected to be finalized over the next 12 months in a Binding Supply Agreement, Orocobre added.

“This MoU is a major development for Orocobre,” chief executive officer Martin Perez de Solay said, “and will underpin the current expansion of the Olaroz lithium facility.”

The brine-based Olaroz asset is in the Jujuy province of northern Argentina and is managed through operating company Sales de Jujuy, in which Orocobre owns a majority stake.

Stage 2 expansion of the Olaroz mine will increase capacity by 25,000 tonnes per year of industrial-grade LCE, with total capacity expected to reach 40,000-42,500 tpy of LCE.

The expansion works were more than 40% complete but have been temporarily slowed as a result of Covid-19-related restrictions.

Weak lithium market
In its operational and financial results for the 2020 financial year, released last week, Orocobre said that the operational restrictions imposed because of Covid-19 had affected production costs and volumes, and had a knock-on effect on the stage-2 expansion at Olaroz.

Orocobre expected that its operational and financial performance in the third quarter of 2020 would be affected by a scheduled three-week outage and by weaker realized lithium pricing resulting from pandemic-related disruptions along the lithium supply chain and the release of inventory into the spot market.

Lithium prices have shown a steady downward trend since 2019, and the outbreak of Covid-19 this year has reduced both supply and demand in this already low-priced environment.

Fastmarkets’ weekly price assessment for lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price range, exw domestic China, was 37,000-41,000 yuan ($5,416-6,001) per tonne on September 3. This was unchanged since July 9 but down from 45,000-51,000 yuan per tonne at the start of 2020 and 75,000-83,000 yuan per tonne at the start of 2019.