Pilbara Minerals to limit June-July lithium output on delays in China chemical conversion capacity

Pilbara Minerals will restrict its lithium production in June and July due to reduced demand in the second quarter of 2019 caused by delays in the commissioning of chemical conversion capacity by the company's key offtake partners in China.

Delays to the construction of chemical conversion capacity at Ganfeng Lithium and General Lithium resulted in lower-than-expected sales of lithium spodumene through the April-June quarter, leading to a reduction in Pilbara Minerals’ output through June and July, the Australian company said on Monday June 17.

The delays in the commissioning of chemical conversion capacity is an industry-wide situation in China, Pilbara Minerals said.

The delays have resulted in lower volumes being shipped from Pilbara Minerals’ Pilgangoora Project in Western Australia over the June quarter, the company added.

Pilbara Minerals’ expects to ship 23,000-45,000 tonnes of lithium spodumene in the April-June quarter, after it sold 38,562 tonnes in January-March.
“It is no secret that the spodumene supply market is experiencing some short-term challenges as the big players, including our cornerstone customers, work to commission and ramp-up their chemical conversion plants in China,” Pilbara Minerals’ managing director and chief executive Ken Brinsden said.

“We have decided to proactively respond to this by working with our long-term partners to assist them where possible during this period. This means that over the coming months we will be moderating production levels to better align our business with expected spodumene demand and use this time to deliver key improvements at the plant,” he added.

Pilbara Minerals produced 22,375 tonnes of lithium spodumene concentrate in May and expects to produce 20,000-24,000 tonnes in June. The company produced 52,196 tonnes in the January-March quarter.

Pilbara Minerals did not specify how much production it would cut at its Pilgangoora lithium-tantalum project, but said it will shut down the concentrator in the second half of July for two weeks to facilitate plant improvement works.

Reduced production will give time for Ganfeng and General Lithium to add conversion capacity. Concurrently, Pilbara Minerals will be working with the two companies to manage its commitments and expects both companies to fulfil their current offtake agreements, it said.

Prices were reported lower at $600-640 per tonne of lithium spodumene on a cfr China and a minimum 6% basis due to the current lower demand for spodumene in China and lower lithium chemical compound prices in the country. This is down from $675 per tonne in the first quarter of the year.

Fastmarkets IM’s latest price assessment for contract spodumene (min 5-6% Li2O) cif China was $600-670 per tonne on May 29, down from $600-700 per tonne on April 24.

Pilbara Minerals stage 1 production has a production target of 330,000 tonnes per year of lithium spodumene – or nearly 43,000 tpy of lithium carbonate equivalent (LCE) – for June 2018 to 2020.

Stage 2 of the expansion project is set to commence in the September quarter of 2020 to increase the company’s total output by as much as 850,000 tpy of lithium spodumene (110,000 tpy LCE).

Lithium spodumene concentrate is used to produce key battery raw materials lithium carbonate and lithium hydroxide.