Spot spodumene prices continue uptrend amid lingering supply concerns
Spot prices for spodumene concentrate continued to post sharp gains over the past fortnight due to tight supply combined with continuously improving demand for downstream lithium chemicals amid booming electric vehicle demand worldwide
Fastmarkets’ price assessment for spodumene 6% Li2O min, cif China was at $2,500-2,750 per tonne on January 21, up by $100-150 from $2,400-2,600 per tonne two weeks earlier, and up by $2,050-2,290 per kg (up 476.92%) from $450-460 per kg on January 27, 2021.
Since the end of 2020, lithium prices have been climbing as a result of China’s strong demand for lithium salts, while western countries have been scrambling to secure long-term supply agreements, fearing a shortage of the ultralight metal in the years ahead.
While demand outstripped supply of spodumene, a spot market emerged for the lithium feedstock in 2021. At present, lingering tight availability of spodumene and the ongoing momentum of downstream lithium salts prices globally has prompted consumers to increasingly accept higher prices for spot offers of the feedstock.
Fastmarkets’ price assessment for lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price range exw domestic China was 350,000-370,000 yuan ($55,166-58,319) per tonne on January 20, up by 10,000-20,000 yuan per tonne from 330,000-360,000 yuan per tonne a week earlier, and up by 300,000-312,000 yuan per tonne (566.67%) from 50,000-58,000 yuan per tonne on January 7, 2021.
Fastmarkets’ assessment of the lithium hydroxide monohydrate, LiOH.H2O 56.5% LiOH min, battery grade, spot price range, exw domestic China was 290,000-310,000 yuan per tonne on January 20, up by 25,000-30,000 yuan per tonne from 265,000-280,000 yuan per tonne a week earlier, and up by 249,000-264,000 yuan per tonne (589.66%) from 41,000-46,000 yuan per tonne on January 7, 2021.
Some market sources noted that due to current lithium chemical prices in domestic China, lithium producers in the country will still be able to maintain some profits if spodumene prices are negotiated as high as $3,500 per tonne, on the condition that the lithium price momentum lasts for the remainder of 2022.
“At the moment nobody else is going into production in the coming months, so it is understandable that in a rising lithium chemicals’ market the spodumene [feedstock] prices keep going up,” an intermediary active source in the Asian lithium market said.
“The time it has taken to restart idle capacity, capacity that was put on care and maintenance back in 2019 and 2020 when prices were falling, has been one of the factors keeping supply tight. While Pilbara Minerals’ Ngungaju plant is in the process of being restarted - it is just unfortunate that it is suffering delays - other idle capacity at the Wodgina and Bald Hill mines has not been in any hurry to restart,” Fastmarkets’ head of battery raw materials research William Adams said.
“As such we do think prices will continue to strengthen until more new supply becomes available - new supply will eventually help alleviate the tightness, but given the supply chain has run down stocks any surplus material is likely to go into replenishing stocks, or to build up working stock,” Adams said.
Lingering tight supply
Earlier in December, Australia-listed spodumene miner Pilbara Minerals lowered its production and shipping guidance for spodumene concentrate for its financial year ending June 30, 2022.
In its latest update, the miner expected to produce 400,000-450,000 tonnes of spodumene concentrate, compared with 460,000-510,000 tonnes previously.
Similarly, its shipping guidance for the financial year was revised downward to 380,000-440,000 tonnes from 440,000-490,000 tonnes previously.
The miner attributed the lower production and shipping guidance to delays with the commissioning and ramp-up of its two processing facilities – the Ngungaju plant and Pilgan plant – as well as both planned and unplanned extended shutdowns there.
It further explained the delays were complicated by an industry-wide shortage of skilled personnel in construction, production and maintenance currently being experienced across the resource sector in Western Australia.
Elsewhere, Australia-listed miner Allkem, the result of the recent merge of miners Orocobre and Galaxy Resources, in its quarterly operational update released on January 18, highlighted that it continues to experience very strong demand for its spodumene concentrate and lithium carbonate products as supply side tightness persists in raw materials and throughout the battery supply chain.
The company also mentioned that 45,000 tonnes of spodumene concentrate shipment is expected to be sold in the first quarter of 2022 with advanced negotiations at an indicative pricing of $2,500 per tonne cif China for 6.0% Li2O. This is in line with the latest assessment on a spot basis published by Fastmarkets.
LFP battery demand in China
The higher prices for lithium compounds - especially lithium carbonate - in China were supported in 2021 by the strong performance of LFP battery chemistries. LFP has cemented its position as the leading chemistry among manufacturers in China, which is currently the single largest market for electrical vehicles (EV), in addition to gathering new interest from international OEMs.
Alliance for Electric Vehicle (CAEV), China produced 125.4 GWh of LFP batteries in 2021, accounting for 57.1% of its total battery output. NCM battery output amounted to 93.9 GWh in 2021, representing 42.7% of the total share.
Market participants expect LFP outputs to continue to exceed NCM outputs in 2022. They also expect NCM battery output to grow in 2022, albeit at a slower pace than LFP battery output.
Emerging spot spodumene market
Fastmarkets increased the frequency of its spodumene assessments from monthly to fortnightly, to better capture the emergence of a spot market characterized by more frequent liquidity over the past months.
While the price assessed by Fastmarkets has shown a rapid uptrend – gaining close to 500% in the 12 months to January 2022 – sources in the market stress that a large volume of spodumene consignments was agreed at long-term contract prices set at the beginning of last year, or at the end of 2020.
“For every tonne of material that is sold now on spot, you have to remember that the buyer most likely sourced the bulk of its purchasing volumes at a long-term price agreed a year ago,” a lithium converter source said. “That was two, three times lower than the spot price today.”
“The tonnage you’ve seen traded on spot in the last two quarters are essentially a top-up orders for buyers who need those volumes to fulfill orders,” a second producer source said.
The two sources suggested that the latest spot prices are not a full reflection of overall purchasing cost for a buyer of spodumene, but rather a glimpse into the extreme tightness lithium raw materials have faced.
There are suggestions, however, that the fast-rising spot prices are affecting long-term agreements as well.
Producer Allkem, for example, said in its latest report that “in 2022, annual contracts that previously had a fixed price will be linked to contract indices with an average of bi-monthly adjustments.”
The company was mainly referring to lithium carbonate sales rather than spodumene; it says its spodumene sales are negotiated quarterly with long-term customers. Nevertheless, carbonate prices rose just as fast as spodumene, leading producers to opt for shorter agreements to better react to price volatility.
Zihao Li in Shanghai contributed to this article