Allkem sees China driving lithium demand

MELBOURNE: Lithium prices are set to surge again in the June half, spurred by a jump in China’s production of electric vehicle batteries and project delays due to COVID-19, Australian lithium miner Allkem said on Tuesday.

Allkem, with mines in Argentina and Australia, predicted that lithium carbonate prices would rise by about 80% in the six months to June from the December half year to around $20,000 a tonne at its export point.

Lithium prices soared last year amid supply constraints, as automakers around the world began investing billions of dollars to transition to cleaner modes of transportation because of a global push to cut carbon emissions.

The strong outlook sent Allkem’s shares up as much as 5.4% to a record high of $11.97.

Armed with strong cash flows, the top-10 lithium producer formed late last year from the merger of Orocobre and Galaxy Resources, is racing to bring new projects on line. “Moving production as quickly as we can is the name of the game,” Chief Executive Martin Perez de Solay told analysts after a quarterly operations report.

In the December quarter alone, China’s production of lithium-ion batteries rose 40% from the previous quarter and more than doubled from the same quarter a year earlier, driving lithium carbonate prices to record highs, Allkem’s chief sales officer Christian Cortes said.

Allkem executives played down analysts’ concerns that lithium prices could suddenly drop with carmakers outside China constrained by broader supply issues.

Perez de Solay said there was no sign of a build in battery stock anywhere. “It’s a very, very tight supply market and as a result of this we’re seeing this very rapid increase in pricing,” Cortes said.

A surge in Omicron-related COVID-19 cases globally is also affecting Allkem’s operations and development activity.

First production at its Sal De Vida mine in Argentina has been delayed by nearly a year to the second half of 2023, mainly because government staff involved in issuing permits for the project were hit by the pandemic, Perez de Solay said.

The company’s Mount Cattlin mine produced 52,225 dry metric tonnes (dmt) of spodumene concentrate in the quarter, bringing total annual production to 230,065 dmt, exceeding its previous guidance by 4.5%. Output at Allkem’s flagship Olaroz mine for the quarter slipped 2% to 3,644 tonnes from last year.