Ground Breakers: Orocobre results show lithium prices are continuing their upwards march
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Lithium prices have risen to historic levels in the midst of an upswing in demand for electric vehicles and energy storage.
While China may be facing headwinds across its economy in the form of power shortages and its debt ridden property sector, EV sales are through the roof.
Auto sales were down 13% year on year in the September quarter all up, but NEV (new energy vehicle) sales were up 150%, with US EV giant Tesla recording a record 56,006 sales of Chinese made vehicles last month.
That bullish EV demand picture underlines the soaring rates Chinese spodumene converters are willing to pay to convert raw lithium materials into chemicals for the battery market.
Lithium large cap Orocobre (ASX:ORE) has demonstrated that upswing again, showing contract prices for the spodumene from its Mt Cattlin lithium project in WA are going to more than double in under three months.
Orocobre pulled US$779/t for its Mt Cattlin concentrate in the September Quarter for revenues of US$69.8 million (up from US$517/t and US$25.1m in June and just US$348/t and US$10.4m in January).
The company says contracting arrangements for the mine, picked up in its mega merger with Galaxy Resources, are “well advanced” with a 38,500t shipment in the December Quarter and 25,000t shipment in early January due to fetch an average price of US$1650/t on a 6% Li2O basis.
Sales prices for lithium carbonate from its Olaroz brine project in Argentina are up 200% over the past year as well, with 2622t fetching a price of US$9341/t FOB for a take of US$24.5m in the September quarter.
Prices are due to rise to US$12,000/t in the December Quarter.
Operational improvements at Mt Cattlin were a bonus for Orocobre, which will soon be renamed Allkem, with forecast CY2021 production revised upwards from 195,000-210,000t of spodumene to 210,000-220,000t and cash cost guidance lowered from US$420-450/t to US$390-420/t.
An economic slowdown in China synthesised with weakness in its property and escalating tensions in the Evergrande crisis combined to give the mining market a whack this morning.
Iron ore prices tumbled by US$7.14/t overnight to US$116.93/t as prices for steel, impacted by demand from the property sector, pulled back.
Base metals also pulled back following a week of gains driven by power-related smelter outages and inventory drawdowns.
ANZ Researchers said concerns about Evergrande, which failed to sell a stake in its property management business it would have used to reduce debt, were weighing on the market.
“Base metals plunged as the Evergrande crisis threatens to hit demand in China,” they wrote in a note this morning.
“The troubled real estate developer failed to offload a stake in its property management arm, which was supposed to ease its cash crisis.
“With the property sector representing nearly a quarter of China’s economic output, the collapse of the company could send shock waves across the commodity sector. Rising prices have also been raising inflationary concerns.”
The diversified miners sunk, led by a 2.18% fall for BHP (ASX:BHP).
Chinese efforts to drag down record high thermal coal prices also had an impact on the coal miners, with Yancoal (ASX:YAL), Coronado (ASX:CRN), New Hope (ASX:NHC) and Whitehaven Coal (ASX:WHC) all down.
“The National Development and Reform Commission warned it may intervene to curb coal prices,” ANZ Research said.
“This follows reports that it had already started conducting inspections in Henan and Hebei provinces to ensure the stability of the coal market.
“The securities regulator said that it will press exchanges to take several measures to rein in speculators. This lowered coal futures on the Zhengzhou Exchange by 10% to a daily limit in Thursday’s session.”