High lithium stocks weigh on Orocobre H1 outlook

Lithium prices will remain under pressure for the first half of 2020, Australian miner Orocobre said, reporting a nearly 50% drop in its lithium carbonate prices.

"In the short term, higher-than-normal inventory levels in some parts of the supply chain are expected to temper price recovery, concealing an underlying improvement in demand," Orocobre said in a quarterly results statement onTuesday January 28.
The average sales price of lithium carbonate produced at Orocobre’s Olaroz operation in Argentina was $5,419 a tonne for the last three months of 2019.
This compares with $10,587 per tonne in the same period of 2018, and $7,111 a tonne in July-September 2019, a drop of 48% year on year, and 24% quarter on quarter.
The Olaroz operation produced 3,586 tonnes of lithium carbonate in the last three months of 2019, down 5% year on year.
But Orocobre was more upbeat on price prospects for later in the year, because the lower prices have shut out high-cost producers.
"Growing pressure on non-integrated Australian hard rock suppliers has become increasingly apparent, resulting in one mine going into care and maintenance," Orocobre said.
"Others announced a shift from continuous to campaign-based production, driven by customer orders rather than the previous approach of maximizing operational output," the company said.
On January 22, rival producer Galaxy announced that it would slash production at its flagship Mount Cattlin mine by 60% tomanage costs.
Galaxy is targeting 14,000-20,000 tonnes of lithium concentrate production in the first quarter of 2020, compared with 41,874 dry metric tonnes in the same period in 2019.
On January 23, Fastmarkets' price assesment for lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price was $8-9.50 per kg, and the price assessment for lithium hydroxide monohydrate, 56.5% LiOH.H2O min, battery grade,spot price was $9.50-11 per kg, both on a cif China, Japan and Korea basis. 
Price assessments were rolled over on January 30 due to extended Chinese New Year holiday in line with Fastmarkets pricing methodology.

William Clarke

william.clarke@fastmarkets.com

Published

William Clarke

February 03, 2020

17:29 GMT

London