Australia’s lithium export earnings are set to more than triple to $18.6 billion in the 2022–23 financial year (FY23) off the back of soaring prices in the second half of last year.
FY22 saw Australian lithium exports generate $5.3 billion in earnings, while only $1.2 billion was earned locally from lithium in FY21.
The battery metal has experienced an unprecedented rise in recent years, as the demand and manufacturing of electric vehicles has risen significantly.
Pilbara Minerals managing director and chief executive officer Dale Henderson recently said that the lithium market has evolved “from a China-based consumption model to a global consumption model”.
“As a response to the economic impacts from COVID-19 across the globe a lot of governments were looking to stimulate their economy and one of the levers they chose to pull was to pour funding into new industries of which EVs and EV subsidies were key beneficiaries,” Henderson said at a recent Melbourne Mining Club luncheon.
“Around about mid-2020, much of Europe started to deploy EV subsidies and shortly thereafter, Europe pound-for-pound was consuming more lithium than China, and then shortly thereafter (that), the US and North American subsets started to pick up, particularly following the appointment of the Biden Administration.
“What’s followed, particularly over the last 18 months, is increased demand translating to increased pricing.”
And while spot prices for lithium materials have cooled since the start of 2023, they are still strong enough for lithium producers to enjoy significant gains.
“Spot prices for lithium commodities have eased since the start of the year, after reaching record highs late last year,” The Resources & Energy Quarterly: March 2023, released this week, noted.
“Spot spodumene concentrate averaged about $US5920 per tonne in February 2023. This was more than double the average spot price for February 2022, and a more than tenfold increase in the prices in February 2021.”
The report suggested that, in March, lithium hydroxide prices had fallen below $US60,000 per tonne for the first time since February 2022. Spot lithium hydroxide prices (delivered to China) had averaged $US74,130 per tonne in January and $US65,600 per tonne in February.
There’s also been a shift in lithium contract dynamics, with miners gaining more control over pricing.
“As most Australian producers have historically utilised long-term contracts, prices received take time to adjust to shifts in spot prices,” the report stated. “However, prices reported by Australian producers confirm spot prices are now flowing more rapidly into contract prices.”
Companies are also exploring innovative ways to commercialise their product, including Pilbara Minerals which recently announced a new sales pathway based on a lithium hydroxide tolling arrangement.
“Under the agreement (made to a chemical converter), Pilbara Minerals will receive the lithium hydroxide price for the product sold less an agreed amount for conversion and other costs,” the Resources & Energy Quarterly said.
“One implication of this trend is that changes in hydroxide prices are likely to flow through to spodumene prices more quickly than the three-to-six-month lags which have characterised price trends in recent years.”
The Resources & Energy Quarterly forecast Australia’s lithium export earnings to fall to $11.8 billion in FY25, before turning a corner and climbing to $19 billion by FY28.
“The biggest downside risk to lithium demand in the short term is a plunge in the growth rate of Chinese EV sales,” the report stated.
“Given China’s key role in driving lithium demand over recent years, a substantial slowdown in Chinese demand this year would put rapid downward pressure on prices for all lithium chemicals.
“While demand in the US and Europe continues to grow, these EV markets are not yet sufficiently large and mature to absorb the slack.”
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