Pilbara paints picture of impending havoc in under-supplied lithium market

A second spot market auction later this month could put the extent of the spodumene shortage on full display.
5th August 2021
Barry FitGerald

A second spot market auction later this month could put the extent of the spodumene shortage on full display. Plus, Beament goes green as Klein fights for gold, Brazilian hydro power could make Centaurus greener than a rain forest and Boss highlights why decarbonisation will fuel a run in the uranium price.  

The big mining news of the past week landed just as 2500 mining and monied types were winding their way to the Diggers & Dealers bash in Kalgoorlie.

It was the flash from Pilbara (PLS) that the winning bid in the first of its online auctions of spodumene on its nascent Battery Material Exchange was an amazing $US1,250 a tonne.

Compare that with index prices of about $US500/t as recently as April and it has got to be wondered just where the scarcity factor for the lithium raw material is going to take prices.

After making his escape from Kalgoorlie back to Perth, Pilbara CEO Ken Brinsden is in no doubt where it’s headed: “It’s only just started”.

The BMX spot sales platform is new to the industry, one that is so opaque, it’s not funny. Sales of spodumene and the end products of lithium hydroxide and carbonate are traditionally done under offtake contracts.

But the initial success of the BMX auction means that the potential for a deep and transparent spot market could be with us. Brinsden said another auction was likely before the end of the month.

Tonnages aren’t big at this stage – the first one was for 10,000t – but Pilbara is giving thought to the potential for batching up a bunch of cargoes for delivery in the March quarter next year on a futures basis.

Pilbara’s big-time spot sale capacity comes from the Altura operation, acquired earlier this year for a song. The company’s existing and adjacent Pilgan operation is committed under offtake agreements until 2024.

Pilbara is working at getting the Altura operation up and running again in the December quarter, with a ramp-up to an annual rate of 200,000t in the first six months of 2022 the plan.

That material is available for spot sales on top of Pilgan’s 380,000t committed capacity.

While the scarcity factor in spodumene came through loud and clear in the BMX auction, Brinsden reckons that it could be the same for lithium hydroxide and carbonate.

While the build out of spodumene convertor capacity has outstripped the raw material supply, supply of lithium hydroxide and carbonate is falling behind the build out of battery capacity. Expect havoc is the message.

So while it is OK for US auto makers to be heading off to Washington this week to say they will spend $US300 billion over the next five years electrifying cars, they had better start looking over their shoulders at just where the battery raw materials are going to come from.

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