Australia's Pilbara sells July delivery spot spodumene at $6,350/mt; above market expectations

Pilbara Minerals announced it had accepted a pre-auction spot offer for 5,000 mt of spodumene with 5.5% lithium oxide at $6,350/dmt on an FOB Port Hedland basis, surpassing the market's expectations on this month's spodumene prices.

The deal was equivalent to $7,017/mt on a SC6.0 CIF China basis, inclusive of freight costs. Delivery was expected in late July, Pilbara said.

The deal was concluded ahead of a proposed spodumene concentrate auction to be held on June 23.The company said it expects to hold another auction in the second week of July.

According to the announcement, the cargo was offered to a select group of registered Battery Material Exchange participants prior to the proposed auction on June 23. BMX is Pilbara Mineral's digital sales platform.

The sale price was higher than market's expectations of around $6,000/mt, sources said, given that China's demand was still recovering following the COVID-19 lockdowns.

"The sale price would equate to a production cost of around Yuan 455,000/mt for lithium carbonate (inclusive of 13% value added tax and Yuan 30,000/mt processing costs)," a Chinese lithium converter said. "This would definitely boost salt prices moving forward, and I believe some sellers would consider raising offer levels significantly next week."

A producer said: "This price level is too high and unsustainable; I'm not sure how converters and battery makers are going to make profits."

Platts had assessed battery-grade lithium carbonate at Yuan 470,000/mt on June 22, while battery-grade lithium hydroxide was assessed at Yuan 462,000/mt, both on a delivered, duty-paid China basis, data by S&P Global Commodity Insights showed.

Chinese lithium prices were little changed through May-June as the battery industry was recovering from Shanghai's two-month COVID-related lockdown that caused industrial activity to grind to a halt.

Rising upstream prices could slow China's demand recovery, according to a Chinese precursor maker. He added that some cathode makers had yet to return to normal run rates after the lockdowns were lifted.

This could pose further challenges for the nickel-cobalt-manganese sector, which has been struggling with high nickel and cobalt feedstock prices. High-nickel NCM batteries require the use of battery grade lithium hydroxide, which is made using spodumene.

Term contract prices for the third quarter of 2022, which are currently under negotiation, would also be impacted by the news of the deal, a Chinese trader said.

"It would be quite difficult to say where prices would be for Q3," the trader added.

However, market sources concurred that tight spodumene supply would likely persist through the rest of 2022, which meant that prices could continue to climb higher. Nevertheless, strong downstream resistance was likely to limit the upside for spodumene prices moving forward.