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Mining
Lithium prices remain sky-high in terms of producer margins, but a slowdown in China has prompted some concerns they will continue to fall from last year’s record highs.
According to Fastmarkets MB, spodumene spot prices on Friday fell US$500/t to US$6750/t, down around 20% their late 2022 highs of US$8288/t.
Lithium chemical prices have also sagged from over US$80,000/t to US$66,250/t for hydroxide and US$61,885/t for carbonate on Chinese shores.
The fast downturn in prices has stoked concerns around the ASX lithium market that the end of China’s EV subsidies and a less boisterous exit from its Covid Zero policy could bring brittleness to last year’s strongest commodity market.
Albemarle, the US corporation counted as one of the world’s largest lithium producers, begs to differ.
The US$30.23 billion battery metals giant saw its share price tumble 9.67% on Friday in a broader lithium market sell-off. But Albemarle, owner of 60% of the Wodgina mine and Kemerton processing plant in WA as well as 49% of the Greenbushes lithium mine, says to hold your horses on calling for an end to China’s EV surge.
“As China reopens, we expect moderation in EV demand to be short-lived with medium and long-term demand remaining robust. We continue to expect EV sales in China to grow 40% year over year, an increase of nearly 3 million vehicles,” Albemarle president, chairman and CEO J. Kent Masters said.
“Sales in China are seasonally weak around the Lunar New Year. We believe the latest phasing out of subsidies will have limited impact on demand.
“EV subsidies have rolled off on schedule since 2013 with only brief declines in sales, continued municipal incentives and consumer preferences support a strong demand outlook for EVs.
“Our contract customers are not slowing down their ordering patterns, and early indications are both that cathode inventory and battery inventory in China are decreasing, which is a good sign for lithium sales.”
The ASX lithium stocks followed their US counterparts lower today, though continue to remain strong profitable.
Pilbara Minerals (ASX:PLS) is testing the market for lithium hydroxide in Asia by selling a 15,000t cargo to a chemical converter rather than sell the uncontracted product on its previously successful BMX auction platform.
It says a strong offer from the converter prompted the strategic shift, a test case for future sales though not a model entirely untested by ASX listed companies. Mineral Resources (ASX:MIN) has been tolling product from Wodgina and Mt Marion in recent months, while IGO (ASX:IGO) and Tianqi are putting Greenbushes spodumene through their now commercial Kwinana lithium hydroxide plant in WA.
“The sale, which was made to a chemical converter, was structured to be based on a tolling arrangement under which Pilbara Minerals will receive the value of lithium hydroxide price for the product sold less an agreed amount for conversion and other costs,” PLS said.
“This is the first time Pilbara Minerals has utilised such a pricing methodology, which has the potential to be highly favourable to the Company and opens the door for future tolling arrangements.”
Meanwhile, BlueScope Steel (ASX:BSL) has warned of a potential impact from the introduction of the Albanese Government’s new safeguard mechanism as it prepares a smelter reline at its Port Kembla steelworks.
The company has long warned “green steel” is decades away from becoming reality, with the company currently investigating a billion dollar plus rebuild of a furnace at Port Kembla to continue blast furnace steelmaking into the 2040s.
It has a low carbon DRI study underway with Rio Tinto (ASX:RIO), but has warned of issues with a hydrogen electrolyser pilot project, which energy giant Shell pulled out of last year, that would have helped produce green fuel for future steel pathways.
“On the electrolyzer project, we haven’t made the progress to date that I would have liked, and we’re having a rethink about what the right model is for us going forward,” BSL MD Mark Vassella said on a conference call this morning.
Vassella says BlueScope will invest $300 to 400 million dollars by 2030 to cut its emissions intensity and that Port Kembla is in the lowest quartile globally for steel industry emissions, having reduced absolute emissions in 2011 by 39% on 2005 levels with the closure of a blast furnace.
He warns it’s too early to say what impact the safeguard mechanism changes will have on BSL’s bottom line, which would force the nation’s 215 largest emitters to cut emissions by 5% a year to 2030.
But BSL is planning to make a submission this month on the policy, with the final reforms due to be announced this half.
The dominant form of steelmaking globally uses metallurgical coal to reduce iron ore into crude steel, with no other technology currently able to replace blast furnace steelmaking at scale.
“If it was to be enacted, as it stands, we don’t have a technology solution for steelmaking, no one does yet, that’s viable or economic,” Vassella said.
“So clearly, what we’re talking to the government about, and we’re considering in terms of our submission is a recognition of the position that we’re in from an industry perspective, not just BlueScope, but a steel industry perspective, how that manifests itself, what it looks like.
“That’s the work that we’re doing right now, that will be part of our submission so I am going to sit on the fence a little bit with this one because we haven’t even put the submission in yet.
“So it’s hard to speculate, what it would ultimately look like and quite frankly, I don’t want to be pre-empting what’s an appropriate consultation process by putting out our thoughts willy nilly before they actually go in for consideration by the government.”
BlueScope paid a 25cps dividend on the back of a weaker half-year financial result as costs and lower US and Asian steel spreads hit.
It was the first fully franked dividend since 2018, however, with BlueScope eliminating its tax losses on last year’s bumper $2.81b profit.
BSL generated $9.357b in revenue in the first half, turning over $1.1555b in EBITDA, and $598.9m statutory profit after tax, down from $1.167b in H1 FY22.
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