Spot prices for lithium hydroxide and carbonate outpace spodumene

As one of the two key feedstocks for the production of lithium chemicals, spodumene from hard rock is processed to lithium hydroxide or carbonate by convertors, the vast majority of which are in China. At the beginning of 2021, with spot prices still near their cyclical lows, there was virtually no margin to be had for merchant convertors buying spodumene concentrates to process into lithium chemicals.

However, as the second chart above shows, the rise in spot prices for lithium hydroxide and carbonate has outpaced that of spodumene over the past year, and implied conversion margins are now extremely healthy at around $13,000-16,000 per tonne of chemicals produced.

In reality, contract structures mean that convertors are rarely able to capitalize fully on such margins given that the carbonate and hydroxide they produce is tied into agreements made historically at lower prices.

However, for merchant convertors with the capacity to buy and sell a proportion of volume on a spot basis, spodumene cargoes with prices of as high as $5000/t (6% Li2O basis) may still be profitable to process under current market conditions.