Argentina Sets Reference Price for Lithium Carbonate Exports, a Bear to the Market!

SHANGHAI, Jun 2 - Recently, Argentina, a major lithium supplier, announced the setting of the reference price for lithium carbonate exports to end alleged mispricing by exporters. As a result of this news, the share prices of global lithium producers plummeted, affecting confidence across the industry.

Argentina's General Customs Administration has set a reference price at US$53/kg, or US$53,000/mt, for lithium carbonate exports to prevent under-quoting of exports and to improve transparency, according to the country's National Tax Administration.

The move is said to be in response to improper pricing practices by exporters, as Argentina has identified irregularities in intra-firm transfer with extremely low pricing in lithium exports over the past two years.

For comparison, Australian lithium miner Pilbara conclueded its second lithium concentrate auction in 2022 on May 24 Beijing time at US$5,955/mt. Shipping costs were US$90/mt for a total of 5,000 mt at a base grade of 5.5%, with deliveries scheduled between June 15 - July 15, 2022, equivalent to a cost of approximately 419,000 yuan/mt or US$62,400/mt for lithium carbonate.

Lithium producer stocks slumped

Shares of lithium miners plunged on the US and Australian stock markets as a result of this move.

Australia's Allkem fell 15% on Wednesday, Pilbara Minerals fell more than 20% and Mineral Resources fell as much as 8.7%.

In the US stock market on Wednesday, shares of lithium giant Arbor closed down 7.8%, Lithium Americas fell 8.11% and Piedmont Lithium closed down 13.39%. Meanwhile, lithium product manufacturer Livent fell 14.28%.

In contrast, shares of US lithium battery makers were less affected, with Microvast (MVST) closing down just 2.6% and Quantumscape (NYSE:QS) closing down 6.25%.

Which A-share companies have a presence in Argentina?

Argentina is currently one of the largest suppliers of lithium ore. Last year the country exported more than 27,000 mt of lithium carbonate with an export value of about US$185 million.

In the A-share market, a number of mining companies such as Ganfeng Lithium, Tibet Summit and Zijin Mining have brine lake resources in Argentina. Previously, ATL had also planned to acquire two brine projects in Argentina through the acquisition of Millennium Lithium, but was eventually "cut off" by Lithium America at a higher price.

Credit Suisse and Goldman Sachs are bearish on lithium prices

As the prices of lithium ore remain high, Wall Street has become bearish.

Credit Suisse analyst Matthew Hope, among others, recently said that they believe "the lithium price rally is coming to an end and prices will start to fall" as the supply shortage appears to be ending.

The firm lowered its price targets and ratings on Allkem and Pilbara, urging investors to take profit.

Just a few days ago, Goldman Sachs Group also predicted a "significant pullback" in lithium prices over the next two years.

According to its May report, Goldman Sachs believes the bull market in the battery metal is "now over" as investor frenzy has led to an oversupply.