Spodumene price surge underpinned by Chinese lithium recovery, bullish fundamentals

The spodumene price cif China posted a sharp month-on-month increase at the end of January after a pick-up in customer inquiries, and market participants expect further rises against a backdrop of bullish supply-demand for the raw material and rising lithium chemical prices in China.

Fastmarkets assessed the spodumene 6% Li2O min, cif China price at $450-460 per tonne on Wednesday January 27, posting its third consecutive monthly gain and an increase of 15.9% from $390-400 per tonne at the end of December.

Prices of the lithium raw material are typical driven by downstream price trends. Domestic lithium battery-grade prices in China started to post sharp increases at the beginning of the fourth quarter of 2020 and accelerated at the beginning of 2021, with suppliers saying most of their stock at hand had been booked previously and they have limited spot supply for the remainder of the first quarter.

“Supported by the surging lithium prices and increasing demand from downstream cathode makers, most lithium producers in China opted to acquire more spodumene as supplement to guarantee their production. Spodumene suppliers have gradually sold off much of their previous accumulated stocks since December 2020, and tight supply for spodumene also transpired at the end of December,” a lithium producer told Fastmarkets.

“If buyers want to secure spodumene now, prices are much higher due to tight supply as most lithium producers have already booked sufficient raw materials in December for the first two quarters of 2021. Some higher offering prices of above $500 per tonne are for the third quarter delivery I think,” a second lithium producer added.

Fastmarkets’ assessment of lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price exw domestic China was 63,000-68,000 yuan ($9,741-10,514) per tonne on Thursday January 28, up 4.8% from 60,000-65,000 yuan per tonne a week ago, and up 65.82% from 38,000-41,000 yuan per tonne on October 15.

Spodumene supply
Spodumene mined from Western Australia is a feedstock material used in the production of lithium chemicals that go into batteries for electric vehicles (EVs). Most of the spodumene mined in Western Australia is shipped to China where it is converted in lithium chemicals.

Spodumene is mined and crushed to form a concentrate. This mineral concentrate is then sold to chemical companies that use the feedstock to produce lithium chemicals. As a result, spodumene pricing patterns are traditionally linked to the performance of lithium chemicals prices.

“The combination of a strong rebound in demand from China’s NEV [new energy vehicles] manufacturers and rapid growth in demand from European EV manufactures, combined with a destocked supply chain, has led to restocking which has raised [spodumene] prices. What has been interesting is that the remaining spodumene producers who report their production and shipments have seen fourth-quarter production climb but shipments soar, with Galaxy and Pilbara shipping record amounts and their stockpiles falling accordingly.” Fastmarkets head of battery raw materials and base metals research William Adams said.

Demand for spodumene concentrate improved significantly in the last quarter of 2020.

In its latest quarterly report, spodumene miner Pilbara Minerals reported that its sales of spodumene increased by 62% in the December 2020 quarter versus the prior quarter due to improved demand from existing offtake customers and new inquiries amid a recovery in lithium chemical prices.

Meanwhile, Australia-based spodumene concentrate miner Galaxy Resources shipped 75,336 dry metric tonnes (dmt) of spodumene concentrate during the quarter, up by 349.6% sequentially from 16,753 dmt.

Galaxy Resources noted its spodumene concentrate inventory had dropped to 17,000 tonnes by the end of 2020, a decrease of around 74% from a year earlier.

The company marketing plans for 2021 are for sales to broadly match production and to continue selling on a spot basis while the market recovery continues.

“The catalyst for change was Altura Mining going into administration with the mine being put on care and maintenance. The company had tried to outrun the downturn by ramping up production, so when it halted production it left a significant hole in supply. Those who had relied on shipments from Altura now had to find alternative sources and that swiftly put pricing power into the hands of the other spodumene producers, especially those with stocks and idle capacity,” Adams added.

Pilbara Minerals announced it completed the acquisition of Altura Mining on January 20. The acquisition has created the largest independent hard rock lithium mining and processing operation in the world. The Altura project will remain on care and maintenance while Pilbara undertakes work to determine the future operating strategy.

Altura started production in 2018 and reached commercial output in early 2019 with nameplate capacity for 220,000 tpy of lithium spodumene concentrate.

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