SMM Analysis: Lithium Producers Conduct Auctions Again To Test Market Sentiment, Overseas Companies Are Still Optimistic About Long-Term Demand For Lithium Industry

Xinjiang Nonferrous Metals Industry Group issued an online auction announcement for spodumene concentrate on the evening of November 1. The grade of spodumene concentrate put on auction is ≥5%, totaling 7,000 mt (6,000 mt on a dry and 6% grade basi), and the starting price is based on the average price of SMM battery-grade lithium carbonate on that day, calculated as a 6% lithium concentrate price (including 13% value-added tax). The starting price would be displayed after entering the bidding hall. The bidding would start at 15:30 on November 6th, and the bidding would last 30 minutes. SMM will continue to track the final transaction information.

After a brief recovery in mid-October, lithium prices have begun to show a downward trend again recently. Amid heavy pessimism in the overall market and a market dominated by short-sellers, lithium salt and lithium mining companies have recently launched bidding and auctions for lithium again. A salt lake company conducted an auction of 500 mt of industrial-grade lithium carbonate last week. The starting price was 150,000 yuan/mt, and the final price was 152,000-153,000 yuan/mt, which did not exceed the average market spot price.

Looking at overseas markets, although lithium demand this year is expected to remain higher than 2022 levels, investors are not optimistic about the growth prospects of the lithium mining industry due to the impact of bleak financial reports from lithium mining companies such as Albemarle, Pilbara Mining, and Livent.

But in conference calls with investors and analysts in recent days, lithium producers said they viewed the market volatility as short-term, adding that they expected electrification momentum to continue to grow.

"We view what's happening now as a bump in the road, but certainly not a determinant of our long-term growth." Eric Norris, head of Albemarle Energy Storage, told investors on Thursday. The company previously cut its annual forecast and reported disappointing quarterly results.

U.S. lithium producer Livent also said it expected lithium sales to remain strong despite its weak performance. "We believe lithium supply will continue to constrain demand," Livent CEO Paul Graves said.

Australian miner Pilbara Mining said last week that "the market backdrop is softening" and ruled out a share buyback or a special dividend to shareholders. However, executives at the mining company said the decision was taken out of temporary caution. Pilbara executives said demand is definitely there and the current market is still very healthy.

Mineral Resources, another Australian lithium mining giant, described the current market situation as a "rebalancing" of the supply chain; Australian mining company IGO warned of continued market volatility earlier this week, but added that the industry's troubles were only "short-term."