Lithium market under pressure amid global trade tensions, inventory increase

Lithium ion battery car

AUSTRALIA’S lithium miners are cutting supplies after China altered its subsidies to vehicle manufacturers and global trade tensions heaped pressure on the metal which is used in the manufacture of electric car batteries.

“The sentiment is very bad. If there is no change in market sentiment in regard to the trade war, it’s hard to see a big recovery in China’s car market,” Helen Lau, an analyst for Argonaut Securities, told Reuters.

“So on the supply side, it is very, very difficult. There must be some consolidation going forward among lithium miners,” she said.

The latest round of quarterly reports last week showed a pattern of lower sales as battery producers wound back demand, while the sales that were made came at lower prices.

Alita Resources called in administrators last week after a failed restructure attempt, Pilbara Minerals cut its third-quarter sales forecast, and Galaxy Resources’ first-half sales halved from a year ago, Reuters reported.

Australia accounts for about half of the world’s lithium from hard rock lithium concentrate, called spodumene, which is shipped mainly to China for processing.

China’s biggest lithium producer, Ganfeng Lithium Company, a large buyer of spodumene, posted a 59% plunge in first-half profit last week, and said it expected prices of Australian hard rock lithium to fall further.

“The outlook in regards to the market remains very soft,” Galaxy Resources CEO, Simon Hay, told an earnings call last week, pointing to rising stockpiles. Converters of hard rock lithium into battery chemicals in China were holding around four months’ worth of stocks, or double usual levels, he said.