Spodumene prices continue rally amid tight availability, robust demand and an emerging spot market

The spodumene import price in China has been skyrocketing since the beginning of 2021 following a pickup in customer inquiries and tight availability of the raw material since Altura Mining's assets were taken off the market.

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

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

Fastmarkets’ latest assessment for spodumene 6% Li2O min, cif China was at $620-700 per tonne on March 31, up by 67.09% from $390-400 per tonne on December 30.

Lithium raw material prices are typically driven by downstream price trends, and market participants have broadly been optimistic about demand in the battery supply chain.

China’s domestic battery-grade lithium carbonate price started to post sharp increases early in the fourth quarter of 2020, which accelerated at the beginning of 2021. It came against a backdrop of momentum in the technical-grade lithium carbonate market following a resurgence in demand for lithium iron phosphate batteries, which typically feed on technical-grade material, and strong restocking along the lithium cobalt oxide battery supply chain, which is used in consumer electronics, market participants said.

Fastmarkets assessed the lithium carbonate 99% Li2CO3 min, technical and industrial grade, spot price range exw domestic China at 79,000-81,000 yuan ($12,087-12,393) per tonne on April 15, more than double the 32,000-35,000 yuan per tonne at the start of October.

Similarly, Fastmarkets’ assessment of the lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price exw domestic China was at 88,000-92,000 yuan per tonne on April 15, also more than double the 37,000-41,000 yuan per tonne recorded on October 1.

The price for battery-grade lithium hydroxide has also jumped since mid-February due to tight supply and an anticipated pick-up in demand for nickel-rich nickel-cobalt-manganese lithium-ion batteries in the second half of this year.

Fastmarkets assessed the lithium hydroxide monohydrate 56.5% LiOH.H2O min, battery grade, spot price range exw domestic China at 80,000-86,000 yuan per tonne on April 15, up by 90.80% from 41,000-46,000 yuan per tonne at the beginning of this year.

Feedstock bottleneck a hurdle to China ramp-up plan

Chinese lithium processors’ ambitious ramp-up plan for this year is driving increased demand for spodumene.

A total of 220,000 tpy of lithium carbonate and hydroxide capacity will be commissioned in China this year, according to data from Fastmarkets battery raw materials team.

But it is unlikely that there is enough spodumene supply to meet all of those needs, according to Vicky Zhao, Fastmarkets’ senior battery raw materials analyst.

“Feedstocks have been concentrated in a few producers’ hands, which create supply tension, causing shortages of feedstock at processors. Many Chinese processors are keeping low utilization rates owing to limited spodumene supply. These processors and some new entrants are struggling to source raw materials, which have aggravated the tight situation,” she said.

“Spodumene supply tightness is expected to continue in the mid-term as new projects will not ramp up in the short term,” she said.

Spot market emerging

Sources across the lithium supply chain told Fastmarkets that tight spodumene availability against a backdrop of an increase in downstream lithium chemicals in China was triggering more spodumene spot inquiries for producers of the product.

A spodumene producer active in Western Australia confirmed that it was receiving a significant number of inquiries, both on a short- and long-term basis.

Some producers have said they intend to sell more material on a spot basis rather than via long-term contracts.

In its latest quarterly report at the end of 2020, Western Australian spodumene miner Galaxy Resources announced that it will continue to sell on a spot basis while the recovery in the market continues.

In March, Pilbara Minerals said it was trialing a sales and trading platform for spodumene concentrate produced at its Pilgangoora lithium-tantalum project in Western Australia.

“The new trading platform will operate in conjunction with the company’s existing and new or future offtake agreements, and will initially be used to sell unallocated or available spodumene concentrate that sits outside existing offtake agreements,” the company said, noting that future production capacity from the Altura assets will also be available on the platform.

The platform aims to allow buyers to purchase Pilbara’s spodumene concentrate through auction, tender process or bilateral sales agreement.

The first sales are expected in the coming months, once the platform has been formally established and engagement with buyers has taken place, the company said.

“A spot market makes for a more efficient market, as prices will react more quickly to changes in supply and demand and the price changes will, in turn, trigger the decisions the supply chain needs to make to keep the market as balanced as possible. In this case, if the current spodumene tightness [increases] spot prices at a faster pace, it will prompt a quicker producer response that, in turn, will help alleviate the tightness/shortage,” Fastmarkets’ head of battery raw materials research William Adams said.