Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Australia’s Pilbara Minerals cut its fiscal 2025 output estimates on Wednesday and said it is optimizing its Pilgangoora operation in Western Australia, resulting in an A$200 million ($131.20 million) improvement in cashflow.
Shares of the country’s biggest pure-play lithium miner rose 4.2% to A$2.97 touching its highest level since early October as of 2318 GMT, while the broader benchmark index was down 0.2%.
Pilbara will now solely operate the Pilgan plant in Pilgangoora, which, after full ramp up, is expected to produce about 850 thousand tonnes (kt) annually.
Its lower capacity and higher cost Ngungaju plant will be placed into care and maintenance by the beginning of December.
Placing Ngungaju plant on care and maintenance is a logical and required response to current lithium pricing dynamics and focuses production at the more efficient Pilgan plant, Jefferies analysts said.
The optimization plan will reduce costs and capital expenditure for the company, although it will take a 100 kt hit to its output for fiscal 2025.
The company now expects output between 700 kt to 740 kt for fiscal 2025, lower than its previous estimate of 800 to 840 kt.
The plan tries to effectively cap the impact from a subdued lithium market, with prices dwindling due to new supply of the battery metal — which is seen as critical for energy transition.
The Ngungaju plant will remain in care and maintenance and will be ready to be fully ramped up within four months, when lithium market conditions improve, to capture the rising price environment, the company said.
“The long-term growth outlook for the lithium market remains robust, driven by technological advancements in e-mobility and energy storage, increasing consumer demand, and supportive government policies,” Pilbara said in a statement.
The company posted revenue of A$210 million for the September quarter, 31% lower than the previous quarter, reflecting lower prices and sales volumes.
($1 = 1.5244 Australian dollars)
(By John Biju; Editing by Anil D’Silva and Alan Barona)
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