High Voltage: Fastmarkets says lithium price rise just temporary unless China cuts production further

• Fastmarkets reckons lithium price increases are not sustainable
• More production cuts are forecast out of China
• Outlook for cobalt, manganese, nickel and graphite demand also sluggish

Our High Voltage column wraps all the news driving ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, and vanadium.

Fastmarkets’ battery raw materials monthly update has flagged that a recent rise in lithium prices might just be temporary, unless there are more production cuts in China.

China’s recent stimulus measures are targeting the housing market, stock market, and lending in general to encourage households and the private sector to begin spending again.

Fastmarkets says, when combined with the ‘cash for clunkers’ subsidies, there is potential for an increase in spending on durable goods, such as electric vehicles.

So far, this development appears to have driven up prices for lithium and spodumene, with Chinese carbonate prices up from ~US$10,400/t to ~US$10,800/t in the past week, but the key question remains whether the upwards momentum can be sustained.

Fastmarkets analyst William Adams says that, given the high levels of inventory and only modest production cuts in China, alongside the ongoing ramp-up of new capacity, it seems likely that the price rise will be temporary. 

“The pick-up in lithium and spodumene prices is welcome across the market as no one likes a depressed market, not even consumers, but we expect it will be difficult for prices to rise too far unless there are more production cuts,” he said. “Indeed, we expect more production cuts.”

Cobalt, nickel, manganese and graphite all sluggish  

On the Cobalt front, Fastmarkets expects to see supply outstripping demand, thanks to a bullish copper market and robust mine production expected to persist in the DRC.

“With supportive measures for copper demand and prices we expect to see more of the same in Q4 with cobalt supply outstripping demand,” analyst Rob Searle said.

“The NCM pCAM market continues to see slow activity which will likely mean refiners in China continue to produce cobalt metal.

“This likely means we continue to see elevated export levels into the seaborne market.” Similarly, nickel is looking oversupplied for the remainder of the year.”

The month began with the LME nickel cash price trending downward, somewhat saved by a late rally in the LME nickel cash price driven by the Federal Reserve’s 50 basis point rate cut and further bolstered by China’s stimulus announcement.

Despite the price recovery, it remains well within the relatively narrow range within which nickel has traded in 2024, apart from a brief peak in May.

“The market’s fundamentals remain oversupplied in 2024, although we forecast a lower surplus than in 2023,” principal analyst Olivier Masson said.

“We expect the nickel market to continue rebalancing in 2025 as the announced production cuts bite.”

On Manganese, Searle says the outlook is not overly positive heading into Q4.

“Manganese sulphate processors and downstream pCAM producers remain watchful for clear signs of improving downstream demand,” he said.

“The weakness in Western EV markets, particularly evident in Europe, has continued to weigh on demand for battery-grade manganese in September.”

Graphite didn’t escape the month unscathed either, with prices for spherical graphite and fine flake graphite seeing a decline due to sluggish demand from the battery sector. But there could be a light at the end of the tunnel.

“The introduction of tariffs on natural graphite from China, in addition to tariffs on graphite anodes, is another step towards the creation of a price premium in the US market for ex-China graphite,” analyst Georgi Georgiev said.

“However, it remains to be seen how long it will take for sufficient demand to emerge in the US to support a potential price premium, with China being the largest market for graphite plus the anticipated supply growth from new graphite projects in Africa.”

Battery Metals Winners and Losers

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Weekly Small Cap Standouts

Arcadium Lithium (ASX:LTM)

LTM shares have caught a rocket this week on the back of confirmation by Rio Tinto (ASX:RIO) that the company will spend $10 billion to acquire Arcadium – one of the few producers to have rolled out direct lithium extraction at its El Fenix site on Argentina’s Hombre Muerto Salar.

Murmurs about a potential takeover had been circling around the traps long before a report in The Australian’s Dataroom column broke the case wide open.

Rio has a number of early-stage lithium projects but has finally pressed the button on big M&A now that valuations have come down from insane 2023 highs.

Rio is testing a form of its own DLE technology at the Rincon brine project, where a US$335 million pilot project with a 3000tpa LCE capacity is set to be completed this year.

Arcadium has had to dial back expansion plans in the face of the lithium price crisis, with expectations that it will lift production capacity from 75,000tpa today to 170,000tpa LCE by 2028. Rio’s introduction brings with it deep pockets and the prospect it could push the accelerator on those plans.

Kali Metals (ASX:KM1)

Kali Metals has expanded its JV with Chilean lithium giant SQM, adding two new tenements: DOM’s Hill and Pear Creek.

Kali is acquiring the new DOM’s Hill tenements from major shareholder Kalamazoo Resources (ASX:KZR) for a cash consideration of $100,000, while the Pear Creek tenement is being snapped up from KZR for just $20,000.

Under the updated JV terms, SQM is to spend $500,000 on exploration by 15 December 2025 to retain its 30% interest in Kali’s DOM’s Hill and Pear Creek tenements and increased its exploration commitment of $1m, now a $4.25m spend by 15 December 2026 to earn 50% interest.

KM1’s landholding is along trend of some major lithium deposits, including Pilbara Minerals’ (ASX:PLS) 414Mt Pilgangoora and Golden Mile Resources’ (ASX:G88) 18Mt Archer discovery.

Piedmont Lithium (ASX:PLL)

In February, the lithium producer cut its workforce by 27% as a reflection of drastically lower lithium prices to save operational costs across its North American Lithium (NAL) JV with Sayona Mining (ASX:SYA).

This didn’t stop PLL working across its NAL and Ghana lithium projects, expanding NAL’s mineral resource by 39% to 87.9Mt at 1.13% Li2O in late August and receiving an environmental permit for its Ewoyaa lithium project with JV partner Atlantic Lithium (ASX:A11).

Now Ghana has issued a mine operating permit for Ewoyaa.

“We look forward to the future development of the Ewoyaa project in due course, subject to the outcome of the mining lease ratification by the Ghanian Parliament, other ongoing design works, and prevailing market conditions,” PLL chief operating officer Patrick Brindle said.

Australian Mines (ASX:AUZ) 

China controls around 80% of the worlds production of scandium, and demand growth for the metal – which plays a key role in solid oxide hydrogen fuel cells, lightweight aluminium alloys and advanced electronic technologies – has led to renewed interest in developing deposits elsewhere.

As such, AUZ has commenced a review of the scoping study for its Flemington cobalt-scandium-nickel project about 370km west of Sydney – a project with a resource of 2.7Mt grading 403g/t scandium.

The scoping study from 2017 had estimated project net present value (8% discount) and internal rate of return – both measures of profitability – at $255m and 37.3% respectively using a scandium oxide price of US$1.5m per tonne.

Under the scoping study, Flemington was envisaged as processing 100,000t of ore to produce 50t of scandium oxide annually.

Mine life was estimated at 18 years with the potential for extension to 45 years, Capex was expected to be a relatively low $74m.

De-risking the project is the success that neighbour Rimfire Pacific Mining (ASX:RIM) has seen at its Melrose and Murga North scandium projects.

RIM recently released maiden resources of 21Mt at 125 parts per million (ppm) scandium (4,050t scandium oxide) at Mulga North and 3Mt at 240ppm scandium (1,120t scandium oxide) at the Melrose deposit.

That explorer has flagged that it is only just getting started. The company will also consider updating the current resource by including ~500 drill holes that were completed between 2019 and 2020.

At Stockhead, we tell it like it is. While Australian Mines is a Stockhead advertiser, it did not sponsor this article.