Monsters of Rock: A rising market charges all batteries as lithium ‘grows 50pc’ in a year
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Want to know just how fast the lithium market is rising?
Look no further than SQM’s quarterly results announcement last week, where the Chilean lithium giant issued some big calls on the market for the quintessential battery mineral.
SQM’s earnings are up 62 times from the paltry US$1.7 million it generated in the third quarter in 2020, when the lithium market hit its nadir, to US$106.1 million in the September quarter of 2021.
Gross profits have near doubled from US$114.8m in Q3 2020 to US$224.8m in Q3 2021.
Revenues are up 46.1% from US$452.9m to US$661.6m on higher prices and larger sales volumes.
There is more joy to come, SQM boss Ricardo Ramos says, with lithium pricing expected to be 50% higher in the December Quarter than the September quarter with spot markets raging and legacy contracts coming to an end.
SQM says on top of pricing it has also lifted sales by 80%, hitting a 120,000tpa production rate with plans to expand to 180,000tpa next year.
“We are confident that our sales volumes could reach close to 100,000t this year, on a market we estimate will grow close to 50%,” Rmos said.
“The market growth is putting pressure on prices, as a result, we forecast average prices to be close to 50% higher in the fourth quarter this year when compared to prices reported in the third quarter 2021.”
It’s fair to say the investment landscape for lithium is buoyant right now, and the leading resources stocks in the ASX 200 today were in the battery metals space.
Among the mid-tiers AVZ (ASX:AVZ), Vulcan Energy (ASX:VUL) — which announced a binding offtake agreement to deliver 26,000-32,000t of lithium hydroxide to French carmaker Renault — and Lake Resources (ASX:LKE) were all big movers.
Nickel Mines (ASX:NIC) was also up 7.98% or 9.5c to $1.285 after announcing an expansion of its MoU with Shanghai Decent in Indonesia where the company produces nickel pig iron for sale to China’s stainless steel market.
ASX-listed Nickel Mines will acquire a 70% interest in 4 next gen rotary kiln electric furnace lines under construction in Indonesia’s Worowali Industrial Park and establish a “future energy” collaboration framework to “optimise the transition to renewable energy sources across the company’s operations”.
Nickel Mines will pay US$371 million for the 36,000tpa Oracle Nickel Project and provide US$154 million of construction funding through shareholder loans between now and March 2023.
The construction of Oracle and Angel would make Nickel Mines the 8th largest producer of processed nickel in the world, above conglomerates including Sumitomo, BHP and Anglo American.
Nickel Mines is also “actively exploring” the possibility of developing a high pressure acid leach project in Indonesia to produce battery grade nickel hydroxide and sulphates for the battery market.
“We are delighted with this opportunity to expand our partnership with Shanghai Decent and further enhance our value to the Tsingshan group,” Nickel Mines managing director Justin Werner said.
“The four RKEF lines of the Oracle Nickel Project will take our total RKEF lines to 12, more than any other of Tsingshan’s project partner companies.
“Importantly, these additional lines will also increase our annual attributable nameplate nickel production capacity to just under 80k tonnes of nickel metal, with likely actual performance to increase this to approximately 100k tonnes of attributable nickel metal, a remarkable achievement having only commenced as a producer in January 2019.
“While our nickel investments to date have been confined to RKEF projects, we are excited to now be actively exploring the developing and investing in a new HPAL project.
“The delivery of such a project would see Nickel Mines become a direct producer of battery grade nickel for sale into the EV market and position it as a truly-diversified nickel producer selling material volumes of nickel into the stainless steel and battery markets.”
Steel and iron ore futures have been on the rise today after prices for spot iron ore climbed back above US$90/t on Friday.