From the Financial Times, January 24:
Miners slash costs and scale back plans to increase production after battery metal’s price plummets more than 80% in 12 months
....MUCH MORELithium miners are cutting costs and scaling back plans to expand production after slowing demand in China for electric vehicles crushed the price of the battery metal.
The price of lithium has tumbled more than 80 per cent in the past year to $13,200 per tonne, its lowest level since 2020, after excessive levels of supply hit the market, according to data group Benchmark Mineral Intelligence.
The fallout has pushed miners — mainly in Australia, which produces 40 per cent of the world’s supplies — to constrain production as decelerating demand for electric vehicles leaves stockpiles of half-processed material through the supply chain.
“We’re going through a period where too many new projects came online in too short a space of time,” said William Adams, head of commodity markets research at Fastmarkets, a price reporting agency. “We’ve just started to see the pullback.”
While lithium has not fallen as low as its 2019-2020 slump, when it hit a trough of about $6,000 per tonne, the profitability of many producers is stretched at current levels.
Goldman Sachs estimates a surplus of 200,000 tonnes of lithium carbonate equivalent, or 17 per cent of global demand, this year, which will require “substantial supply cuts” to balance the market.
But politicians and executives in Australia worry that it is miners there which are most exposed to the unexpected speed and depth of lithium’s decline, after their projects were the first to feel the ripple effects.
On Wednesday Pilbara Minerals, a key player in Australia’s lithium industry with a A$10bn market value, warned that it would not pay a first-half dividend after a 46 per cent drop in revenue in the three months to December, due to the volatile price for lithium.
Earlier this week Liontown Resources had an agreed A$760mn loan to bring its maiden Kathleen Valley project into production unexpectedly canned because of the sliding lithium price. The lending package for Kathleen Valley, set to be one of the world’s largest lithium mines, was contingent upon a previous, higher price forecast.
The group, backed by Australia’s richest person Gina Rinehart, is reviewing its mine expansion and scrambling to secure a smaller loan after its share plummeted by a fifth, valuing the company at less than A$2.2bn ($1.45bn).
Albemarle, one of the world’s largest lithium companies, has forecast that capital expenditure this year will drop to $1.6bn from $2.1bn in 2023, to conserve cash. It will also cut jobs and $95mn of annual costs.
Core Lithium, operating out of Australia’s Northern Territory, said this month it had stopped mining and was going to write down the value of its assets, as it shifted its business to merely processing stockpiled ore due to the price collapse.
The rush to halt a potential gush of new supplies on to the market comes with manufacturers already struggling to shift the backlog of lithium in global supply chains. In particular, electric vehicle sales have cooled in China, the world’s largest market, and automakers warn of a “bloodbath” from discount wars on unprofitable electric models.
Fully electric vehicle sales increased 84 per cent to 5.4mn units in 2022 but preliminary data suggests growth last year was only 25 per cent, according to official Chinese data....
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