Global spodumene inventories edged higher in Q1, inventory pressure to slow lithium salt production in China

SHANGHAI, May 15 (SMM) – China’s spodumene concentrate inventories saw an addition of 3,343 mt of lithium carbonate equivalent (LCE) in the first quarter, which together with an inventory draw of 1,765 mt of LCE in overseas stocks, led to a build of 1,578 mt of LCE in the global spodumene inventories in Q1, showed SMM calculations. 

Prices of spodumene moved lower in Q1, following declines in lithium carbonate prices as demand decreased after the coronavirus outbreak. This added mining costs and cash flow burden at overseas miners and compelled them to scale back operations. 

SMM survey showed that spodumene production at foreign miners fell 13% in Q1 from Q4 of 2019. Output at mines, except Talison and Marion that have stable contracts with consumers, dropped 45.7% during the same period. 

Customs data showed that the prices of spodumene concentrate imports in China used to produce lithium salts averaged $439.8/mt in March (excluding prices agreed in long-term contracts), down 22.4% from December 2019. 

China’s spodumene stocks expanded in Q1 as the coronavirus crisis prolonged the suspension of Chinese lithium salt smelters after the Chinese New Year holiday and slowed the ore consumption, with a drop of 25.1% in domestic lithium salt output in Q1. 

The accumulative inventories of spodumene in the overseas market currently stay at high levels, and foreign miners are still in a destocking phase. SMM survey indicated that the spodumene stock balance outside China came in at above 40,000 mt of LCE in Q1 2020, with stocks of raw ore approaching 30,000 mt of LCE.

SMM expects lithium miners to step up their destocking pace as falling demand amid the pandemic has sent prices of lithium carbonate to record low levels, suggesting that the inventory pressure gradually transfers to the smelting front. 

China’s inventories of lithium carbonate expanded quickly since the second half of 2019, and the accumulative stocks had exceeded 60,000 mt as of April 2020 (including the amount produced into lithium hydroxide).

Elevated inventories of ore and finished product have triggered a slowdown in production at some lithium salt smelters in May. This is likely to see prices of battery-grade lithium carbonate stemming decline and stabilising at 40,000-42,000 yuan/mt, SMM forecasts. 

Prices of battery-grade lithium carbonate may also find some support from costs as the near-term prices of spodumene concentrate may unlikely to fall below $400/mt in light of the cash cost at mines. 

SMM assessed prices of domestic battery-grade lithium carbonate (99.5%) at 43,000-44,000 yuan/mt as of May 15, down 750 yuan/mt from a week ago and down 3,000 yuan/mt from a month earlier.