Will the lithium price rout kill the next wave of Australian mines?
When battery-grade lithium prices descended into a bloodbath on the new Guangzhou Futures Exchange last month, it sent ripples through the Australian bourse, tearing chunks off the share prices of lithium miners and explorers.
More than $1.5 billion was wiped from the value of ASX-listed lithium giant Pilbara Minerals following sharp declines on China’s first futures contract for the metal.
Reactions in the ASX lithium sector are often disproportionate responses to small pieces of market pricing, remarked Pilbara Minerals boss Dale Henderson, pointing to Pilbara’s stock rebounding within a day of the Guangzhou futures meltdown in mid-July.
Battery grade lithium prices have nearly halved since the beginning of the year. Bloomberg
Still, the futures volatility reflects the market is uneasy amid broader fears of afaltering Chinese economic recovery blunting demand in the world’s largest market for electric vehicles, a key driver of lithium prices.
Daily prices in the spot market for lithium-rich spodumene concentrate have collapsed by nearly half in the past six months, according to CRU Group, a London-based mining consultancy.
And the slump has started to show up in company results. Pilbara revealed in its quarterly on July 25 that its earnings were dented by spodumene prices dropping 33 per cent in the three months to end-June compared to the previous quarter.
A few days later, nickel-lithium miner IGO posted record production at its joint venture lithium mine, Greenbushes – the world’s best hard rock lithium mine and located in WA – but its June quarter earnings were dented by a 6 per cent collapse in the spodumene price.
Despite the volatility, the next wave of ASX-listed lithium projects by Allkem, Liontown Resources,
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