Australian lithium output cuts seen on price slump

Core Lithium

23/01/2024 05:31

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      Lithium downturn seen shorter term than structural nickel
glut
    

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      Miners have cash cushion due to 2022 price surge
    

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      Customer pushback might cause production curtailments
    

  
    By Melanie Burton
       MELBOURNE, Jan 23 (Reuters) - Australian lithium
producers may be set to track the nickel industry in project
curtailments and delays this reporting season, analysts say,
given slower than expected electric vehicle (EV) sales, but the
jolt is expected to be less severe.
    Both sectors are contending with a sharp drop in raw
materials prices because of the EV slowdown, but lithium is
expected to snap back faster because its oversupply is seen as
short term.
    Nickel miners have come under pressure because of a surge in
Indonesian supply that has hammered prices and triggered a spate
of writedowns, reflecting a shift in market structure that could
last as long as three years, according to First Quantum  FM.TO .
    "If you have a prolonged period of depressed pricing then
there is the potential to see additional capacity curtailments
and or delays, or deferrals of new projects and capacity," said
analyst Reg Spencer of Canaccord in Sydney. 
    "(But) the energy transition has not gone away, it’s just a
period of slower demand growth," he added.  
    Core Lithium  CXO.AX  on Jan. 5 announced job cuts and
suspended mining at its Finiss operations in the Northern
Territory while Liontown Resources  LTR.AX  had to return to
market to restructure its debt on Monday which sent its shares
tumbling more than a quarter.  
    After a six-fold surge in prices from late 2021, lithium
miners like Pilbara Minerals  PLS.AX  have built up a cash
cushion that offers protection as prices reverse course, said
Glyn Lawcock of Barrenjoey. Pilbara reports on Wednesday.
    But even cash rich miners may seek to cut production of
lithium ore spodumene if their customers want less, he added,
since chemicals makers are facing a glut of existing inventories
for a product with only a six-month shelf life.  
    "We're looking to see whether there's any signs of customers
saying, well, we don't need as much spodumene right now because
we're just not ready to convert it," he said. 
    The world's largest low-cost lithium mine, Greenbushes in
Western Australia, has mothballed production before and IGO Ltd
 IGO.AX  in September flagged cuts could be on the table. 
    The joint venture between China's Tianqi Lithium 002466.SZ ,
IGO and Albemarle  ALB.N  produced 1.49 million tonnes of
spodumene in the 2022-2023 financial year.
    Tianqi and IGO also own the Kwinana Lithium Hydroxide
Refinery which has been running well below capacity. 
    Mining services billionaire Chris Ellison's Mineral
Resources  MIN.AX  operates three lithium mines. It reports on
Thursday. 
    Mt Marion, which it half owns with Ganfeng Lithium
 002460.SZ  has capacity of 600,000 tonnes of spodumene.     
    It has a half share in the Wodgina mine with Albemarle,
which has capacity for up to 750,000 tonnes of spodumene and its
recently acquired Bald Hill which can produce 150,000 tonnes. 
    IGO  IGO.AX , which has flagged a further writedown at its
Cosmos nickel project, will be closely watched for lithium
developments and its plan to develop a battery chemicals plant
near Perth when it reports under new CEO Ivan Vella on Jan. 31.
   

 (Reporting by Melanie Burton; Editing by Stephen Coates)
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