Lithium prices only go up: Pilbara Minerals sells cargo for world record $US5,650/t

Pilbara Minerals’ (ASX:PLS) fourth auction on the Battery Material Exchange (BMX) digital platform for 5,000t (SC5.5%) spodumene went off at a record $US5,650/t last night.

That more than doubles the $US2,350/t fetched in the previous auction held last October.

In the December half of 2020 – when pricing was still weak — Pilbara Minerals sold 114,239t of spodumene concentrate in contracts for revenues of ~$59m.

It will rake in ~$28.2m alone for this spot cargo alone.

“Pilbara Minerals envisages that auctions will be held on a more regular basis as Ngungaju [old Altura operation] production continues to ramp up and more uncommitted tonnes become available,” PLS said today.

A spearhead for rapidly rising lithium prices

PLS has been frontrunning surging lithium prices with its innovative auction platform, which is a new way to sell tonnes not under contract.

(Note: most lithium tonnes are under contract. Spot tonnes are rare as rocking horse s..t, hence the outsized price moves.)

The inaugural BMX auction in June last year hit $US1,250/tonne, more than doubling the industry average at the time of ~$US600/t.

In September, the miner sold an 8,000t spodumene cargo on the spot market for an extraordinary $US2,240/t.

The third auction on the Battery Material Exchange (BMX) digital platform for 10,000t (SC5.5%) spodumene in October went off at a record $US2,350/t.

Yesterday’s result more than doubles that figure.

And remember — the average price for SC6% cargoes in late 2020 was just ~$US380/t.

While the super high price can be partially attributed to the relatively unique and competitive form of sale (open auction), it also verified what has long been suspected – there is not enough lithium being produced to meet current demand.

Brinsden was right – carmakers were asleep at the wheel

Earlier this year outgoing PLS boss Ken Brinsden said that analysts underestimated just how tight the lithium market was.

Carmakers would struggle to find the lithium needed to fill EV orders, he said, pushing prices higher.

“I don’t want to be trite but carmakers have been asleep at the wheel,” he said in January.

“They haven’t been paying enough attention to the supply base in battery raw materials in the last five years.

“And it’s coming back to haunt them because insufficient incentive was placed in the market when it was really required especially in that period 3-5 years ago to get to where we needed to be today.”

Brinsden said end users of lithium products had not sent enough capital to miners and failed to provide definitive offtake agreements when they needed to provide confidence to the industry.

That has created a dearth of new supply Brinsden said “now will take some years” to sort out.

$PLS @PilbaraMinerals concludes another successful auction-winning bid of $5650/t, way up. By comparison, Ganfeng’s SP has fallen since Sept 21. Margins sit with the miners & will continue to do so. #RKEquity‘s view remains constant – 2022 M&A mostly hard rock in NA and WAUS pic.twitter.com/hnaabKEZ2A

— Rodney Hooper (@RodneyHooper13) April 27, 2022

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Author: Reuben Adams