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Australia-listed lithium producers see little respite from difficult market conditions for the rest of 2019 amid reduced demand from Chinese customers after a change in the country’s electric vehicle subsidies and global trade tensions.
Orocobre Ltd, which produces lithium carbonate from Argentina, and Pilbara Minerals Ltd, which produces Australian concentrate, both flagged high global inventories of lithium this week as the result of a ramp up in delays by chemical converters.
Prices of lithium hydroxide have fallen by 20% over the past year, while prices of lithium carbonate are down by 40% over the same period
Prices of lithium hydroxide have fallen by 20% over the past year, while prices of lithium carbonate are down by 40% over the same period. The concerns raised by the lithium miners suggests that these low prices are likely to persist.
Several producers of Australian hard rock lithium supply have been asked by customers to delay shipments, find alternative customers and to renegotiate offtake agreements, Orocobre noted in its quarterly production report.
China cut electric vehicle subsidies at the end of June following a three-month transition period, having raised the standards for new energy vehicles (NEV) that qualify for subsidies and reduced the amount provided to relevant companies.
Demand has also been hit by uncertainty following the trade dispute between China and the United States, Orocobre and Pilbara said. Growth in China’s NEV segment, usually a bright spot for the sector, slowed sharply in May when sales grew just 1.8% versus 18.1% in April.
“In regard to the general market condition, at this stage, we don’t see any imminent market change in the way of improvement at this time,” said Orocobre’s Business Development Manager David Hall on an analyst call following results.
Pilbara Minerals Chief Executive Ken Brinsden flagged lower expected sales for the upcoming quarter as it limits some production to alleviate oversupply.
“Key customers have continued to progress the build-out and commissioning of their chemical conversion facilities in China, albeit at a slower rate than expected,” Pilbara said in its report.
Pilbara plans two maintenance shutdowns in the September quarter after a plant closure in June to help better match supply with demand, executives said in a results briefing where they also flagged a slower ramp up of its stage two expansion.
“From experience we’d say we can bring on the mine capacity faster than the equivalent chemical capacity can be brought on. With that in mind, you probably don’t want to bring on big chunks of mine capacity too quickly,” Brinsden said.
(By Melanie Burton; Editing by Christian Schmollinger)
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