Albemarle loses more than $1 billion on falling lithium prices
The results underscore the supply glut engulfing the entire lithium industry amid oversupply from China.
A new report by Roskill states that the lithium industry is in a waiting game. Suppliers are limiting capacity utilisation and expansions to see if prices pick up as demand grows and inventories go down.
Although the strategy is expected to provide significant opportunities, it’s not clear when it is going to be really effective.
The set of tactics -Roskill’s document states- comes in response to weakening prices for key lithium products, which have been experiencing a downward trend since last year. In December 2019, for example, lithium carbonate spot prices fell to their lowest monthly average since February 2015 at less than $8,000 a tonne, whilst average longer-term contract prices also continued their decline.
Similarly, hydroxide prices now average just over $10,000 a tonne and spodumene concentrate (6% lithium for hydroxide manufacture) fell by 3.5% last October to average $450–$510 a tonne. Overall, this represents a 45% drop in the last year.
“This pricing trend comes as a direct consequence of the supply of lithium feedstock from spodumene operations overshooting demand, which, when coupled with rapid expansions in mineral conversion capacity since 2017, has propagated downstream,” the market analyst’s report reads.
According to Roskill, even though miners have been taking action to limit oversupply and support prices, with many of them reducing or suspending production voluntarily or as a result of lower pricing, most are going to have to learn to adjust to the new market.
In the analyst’s view, besides closing the taps, proactive actions such as focusing on product quality, guaranteeing offtake agreements and maximising short term profit margins, seem beneficial for those that wish to take advantage of the uptake in lithium-ion battery technologies in automotive and energy storage uses.
