Arcadium Gives Lower Lithium Price Scenario Analysis and Delays Projects Development

On 6 August, Arcadium Lithium announced its Q2 2024 results, highlighting a revenue of US$254.6 million and an adjusted EBITDA of US$99.1 million and a margin of 39%.

- Quarterly Performance -

During the quarter, Arcadium Lithium sold approximately 10,800 metric tons of combined lithium hydroxide and carbonate, slightly increasing from 9,300 tons in the last quarter. The sales generated US$185.8 million in revenue at a lower realized average price of US$17,200 per metric ton than US$20,500 in the previous quarter.

Additionally, the company sold 23,500 dry metric tons of spodumene concentrate from Mt Cattlin in Australia, bringing in US$23.8 million. The lower sales volume is partially offset by the higher SC6 price of US$1,140 per ton this quarter, compared with US$920 per ton in the last quarter.

Despite a decline in market prices for lithium chemicals, Arcadium said its long-term contract pricing helped secure the higher price by protecting two-thirds of the contracts via fixed price floor, according to Paul Graves, the CEO in the March quarter earnings call.

- FY2024 Outlook -

Arcadium Lithium expects total lithium carbonate equivalent (LCE) sales volumes in FY2024 to fall within 62,000-66,000 tons, which is lower than the prior 2024 guidance disclosed in Q4 2023. This includes 44,000-49,000 tons of combined lithium hydroxide and lithium carbonate, and 120,000 tons of spodumene concentrate (15,000 tons of LCE). The company maintained lithium carbonate sales projections, and reduced the lithium hydroxide sales projections, citing the additional conversion costs and market demand being the main reasons.

Arcadium has based its H2 2024 revenue and margin projections on average LCE prices of US$15/kg and US$12/kg (US$25/kg and US$15/kg were referenced in the Q1 earnings report). Despite management clarifying that $12/kg is not a forecast, many raise questions to probe into the company's financial resilience and operational strategy if this price level continues.

- Project Development Updates -

"It's increasingly clear that at current lithium market prices, our industry cannot invest in capacity expansion at the pace announced to-date," said Graves. Arcadium is to pause investment in its Galaxy project (formerly as “James Bay”) in Canada, a merchant spodumene concentrate producing facility with 40,000 tons of LCE annual capacity. Galaxy was planned to achieve mechanical completion in 2026.

Additionally, Arcadium is adjusting the order of its 25,000 metric ton lithium carbonate projects at Salar del Hombre Muerto in Argentina, opting to complete Fénix Phase 1B and Sal de Vida Stage 1 sequentially rather than simultaneously. The development will be mainly funded with operating cash.

The development of the 32,000 metric ton Nemaska Lithium project in Canada will continue as planned. "Being a non-Chinese, fully integrated hydroxide plant", said Graves, Nemaska is unique in its position.

Regarding spodumene production, Graves acknowledges that if prices remain at the current level, the company may consider pausing production at Mt Cattlin or putting it into maintenance.

- Li-Metal Acquisition Rationale -

Arcadium Lithium has also recently acquired Li-Metal’s lithium metal business for US$11 million, taking over Li-Metal's intellectual property, production assets, and a pilot production facility in Ontario, Canada aimed at commercializing metal production technology.

"We've been looking for a way to bring more metal production in-house, but not using the chloride-based process." Graves highlights that the lithium metal market is anticipated to grow significantly over the next decade, driven by solid-state battery technologies advancements. Although widespread commercial adoption is not expected before 2030, the acquisition positions Arcadium to more diversed sources of supply as the market evolves.

Author: Hongqiu Su | Battery Metals Analyst Associate | London Office, Shanghai Metals Market
Email: lilysu@smm.cn