ASX-listed lithium producers confident price rebound will follow supply cuts

Australian-listed lithium miners are confident they can weather current weak prices by cutting spending and slowing development of growth projects while waiting for supply curtailments to spur a rebound.

Spodumene prices have flattened after a 15-month plunge, with lithium chemicals prices following a similar trajectory. Platts assessed the 6% spodumene FOB Australia price at US$870/t on Feb. 27, steady for three trading days. S&P Global Commodity Insights' analysts expect subdued prices and a smaller-than-expected surplus of 12,816 metric tons in 2024 before supply shortages return in 2028.

Mineral Resources Ltd. Managing Director Chris Ellison was more buoyant about the price outlook during a Feb. 22 analyst call, after saying in January that lithium prices could keep falling for another six months.

"We're normally used to operating in an environment [where] we're getting around US$455 to US$600 a [metric] ton for our product," Ellison said of the spodumene price. "I think in the long term, it's a US$2,500 [per metric ton] environment that we'll be sitting in. ... I think incrementally it will grow over this year."

Paul Graves, CEO of Arcadium Lithium PLC — the newly formed entity from the US$10.6 billion merger between Australia's Allkem Ltd. and US-based Livent Corp. — expects the current trend of higher-cost production coming out of the market to continue.

"It is much more challenging to manage these capital-intensive projects through such volatile price environment given the direct impact on our earnings and cash flow. When we have prices for extended periods of the levels we see today, we have to be very cautious in how we use our balance sheet to fund expansions," Graves said Feb. 23 during a full-year results call.

"The longer the prices stay near these levels, the greater the impact will be on future supply shortfalls. As we saw in 2022, this will increase the likelihood of a rapid increase in lithium prices at some point in the future, although the complexity of the global battery supply chain [makes] both the timing and extent of such an increase difficult to predict," Graves said.

More deferments

Mineral Resources is delaying the commissioning of the third processing train at Wodgina in Western Australia, which financial services firm Euroz Hartleys views as "positive for lithium prices," according to a Feb. 22 note.

"We're really not in a hurry to turn that on," Ellison said about Wodgina's third train. "We'll sit and see where the price goes, and when the price is OK, we'll be bringing that on stream."

Similarly, while the fourth train is scheduled to come online around mid-2026, "we're going to flex these [projects] depending on market. ... [We're] certainly not going to turn it on and put more ore in the market than we can sell," Ellison said.

Lower production from the huge Greenbushes mine in Western Australia led part-owner IGO Ltd. to lift the fiscal 2024 cash cost guidance for the asset to A$330 million to A$380 million from prior guidance to A$280 million to A$330 million. Fiscal 2024 guidance for Greenbushes' spodumene production has been lowered to a range of 1.3 million metric tons to 1.4 MMt, from the previous 1.4 MMt to 1.5 MMt.

IGO CEO Ivan Vella said one of his top priorities this year is to work with partner Tianqi Lithium Corp. to deliver the continued ramp-up of the long-troubled Kwinana refinery in Western Australia, for which he could not provide "any certainty or clarity on the rate and pace of that ramp up this year."

Arcadium will deploy US$450 million to US$625 million in growth capital in 2024, with an additional US$100 million to US$125 million of maintenance capital. For growth spending, this is lower than what Livent and Allkem separately projected last year, Graves said.

Arcadium also flagged delays of up to nine months at its Argentine assets, as the US$225 million to US$325 million of growth capital earmarked for the project assets is not enough to bring the Phase 1b expansion at the Fenix project online by the second half and achieve first production at Sal de Vida in 2025, Graves said.

Graves said Arcadium will also "take the time to explore potential development efficiencies and future operational flexibility" at the Whabouchi mine in Quebec. While Whabouchi and James Bay also face nine-month delays, "any potential delays at Whabouchi should not impact the expected timelines for Bécancour hydroxide production, which was not expected to require feedstock until 2026," Graves said.

Pilbara Minerals Ltd. also lowered its fiscal 2024 capital expenditure guidance from A$875 million to A$975 million to a new range of A$820 million to A$875 million, with "a number of new projects and enhancements deferred for conservatism," CFO Luke Bortoli told a Feb. 22 call.

Platts Lithium Spodumene FOB Australia is an offering of S&P Global Commodity Insights. S&P Global Commodity Insights is a division of S&P Global Inc.