Participants speculate price floor for spodumene following sharp declines and operational suspension

Market participants across the lithium value chain have been speculating over the price floor for spodumene, a key feedstock to produce lithium chemicals, amid sustained weakness in prices

Market participants across the lithium value chain have been speculating over the price floor for spodumene, a key feedstock to produce lithium chemicals, amid sustained weakness in prices

Spodumene prices have fallen by close to 90% since January 2023, a trend which is similarly reflected in the prices for battery-grade lithium hydroxide and carbonate in Asia.

Fastmarkets most recently assessed the spodumene min 6% Li2O, spot price, cif China at $800-950 per tonne on Wednesday January 17.

The spodumene price was assessed at $7,500-7,790 per tonne on January 19, 2023.

The rapid rate of decline in spodumene prices has been largely driven by softening downstream chemical prices. There has also been relatively ample supply of spodumene, further exacerbating the bearish sentiment in the market.

Fastmarkets most recently assessed the lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price cif China, Japan & Korea at $14-15.25 per kg on January 17, unchanged from the previous day, but down by more than 80% from year-earlier levels.

Similarly, Fastmarkets assessed the lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea at $14-15 per kg on January 17, down from $14-15.25 per kg the previous day and down by 81% from a year earlier.

Participants in the physical market believe that the direction of spodumene prices clearly monitors that of hydroxide and carbonate.

“The bottom of spodumene prices depends on where the bottom is for lithium prices. Now there’s some stability of lithium prices, the spodumene prices may as well show some stability,” an international lithium producer source said.

“I think we’re already close to the floor; I might be wrong and things can change, but it seems that all signs point that we’re close [to a floor],” a spodumene producer source said.

This sentiment was also echoed by traders.

“I think the prices may already hit the bottom. Very few miners would agree to below $800,” an international trader said.

Supporting this, is the belief that market prices are already deep into the cost curve, squeezing producer margins.

“The Australian miners are not selling any spot materials since the sales prices are hitting below their production costs,” the trader noted.

This is perhaps best evidenced by Australian spodumene producer Core Lithium’s announcement on January 5 that it was “temporarily suspending operations” at the Grants Pit in its Finniss operations in the Australian Northern Territory.

In its announcement, the company noted the decision was taken “in the light of the significant decline in spodumene concentrate pricing.”

In its fiscal year 2024 guidance published on July 24, 2023, Core Lithium projected that its C1 costs, the direct cost of production, would be $1,165-1,250 per tonne for spodumene.

Room for downside?

Though there is growing belief that prices could have already reached their floor, some in the market believe there could still be room for further downside.

Demand for spodumene has been weak in recent months amid ample availability of material.

“Australian spodumene is still being shipped to China, but it’s difficult for it to be sold,” a Chinese lithium producer source said.

“If you look to historic prices, sub $500 per tonne prices are not unprecedented for spodumene,” a second trader said.

The lowest assessed price for spodumene in recent years was $360-390 per tonne in October 2020.

But others believe that it would be difficult to return to such prices in today’s market.

“You can’t compare current market with 2018 to 2020. The supply and demand dynamics are completely different from back then. The miner’s production costs are also higher than back then,” the international trader said.

Fighting to maintain market prices

Participants have noted in recent sessions that some producers have become more aggressive in their offers, refusing to negotiate below certain levels.

“The Australian miners still have large inventories and hope to sell above $1,000 per tonne. They also won’t agree to the M+2 QP,” a Chinese trader said, referring to business negotiated with a quotation period on a trailing two-month basis.

“They think the prices are hard to rebound and may even continue falling in the near term,” the Chinese trader added.

This concern over potential downside has resulted in some holding back material in the hope of a rebound in prices.

“The Australian miners would rather ship their stocks to Chinese ports first and monitor how the market develops,” the Chinese trader told Fastmarkets.
“The key metric will be how the prices respond post Chinese New Year,” the spodumene producer source said.

But pressure for flexibility has increased, with consumers now looking to alternative producers for material.

Growing gap between regions

One challenge exacerbating the decline in the spodumene price has been the regional variation of prices.

Though Australia has historically and still dominates spodumene production, new hubs of production have emerged in recent years and months. Spodumene is now being sourced from Brazil, North America and Africa, challenging the dominance of Australian material in the market.

This new material is often marketed competitively and has resulted in a wide spread of prices for spodumene, with Australian material typically trading at higher levels.

Though, this is often not due to significant differences in quality, more terms associated with the agreement, such as the quotation period. However, operational costs are also an important factor in the valuation of spodumene, with participants noting that Australian producers are typically higher on the cost curve.

Weak prices delay expansions

One consequence of the sharp decline, and potential sustaining of low prices is the impact on future expansion plans while producers look to save cash and investors shy away from the market.

“Given the overall lithium weakness, the new spodumene projects are expected to be delayed,” the international trader said.

Participants across the market are often keen to highlight the cyclical nature of the lithium market in terms of price.

The lithium market is no stranger to drastic swings in price direction, and has experienced rapid increases and rapid declines before, with these cycles typically driven by periods of higher demand and tight supply.

“There are not many sectors where even the dark days see double digit growth in demand,” the spodumene producer source said.

Some believed that production curtailments could be keen to price stability, and therefore assist the industry in finding its price floor.

“If more miners start to put their mines on care and maintenance, the lithium oversupply may be eased and only until then we may see some stability in the lithium and spodumene prices,” the international trader said.

Keep up to date with the latest lithium prices, data and forecasts on our dedicated lithium price page.

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