Watch out for "sharp but brief price drop" in lithium price, Macquarie

LiveWire11-26 11:50

The ASX lithium trade has been both rewarding and debilitating at times over the last 2 years. Those who have endured the last bull and bear cycle have likely experienced both sides of the emotional ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2486013838?lang=en_US&edition=fundamental","thumbnail":"","is_english":true,"pubTime":"2024-11-26 11:50","share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","id":"2486013838","market":"us","top_or_hot":-1,"title":"Watch out for \"sharp but brief price drop\" in lithium price, Macquarie","media":"LiveWire","content":"<div>\n<p>The ASX lithium trade has been both rewarding and debilitating at times over the last 2 years. Those who have endured the last bull and bear cycle have likely experienced both sides of the emotional ...</p>\n\n<a href=\"https://www.livewiremarkets.com/wires/watch-out-for-sharp-but-brief-price-drop-in-lithium-price-macquarie\">Source Link</a>\n\n</div>\n","source":"livewire_stock","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Watch out for \"sharp but brief price drop\" in lithium price, Macquarie</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWatch out for \"sharp but brief price drop\" in lithium price, Macquarie\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-26 11:50 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.livewiremarkets.com/wires/watch-out-for-sharp-but-brief-price-drop-in-lithium-price-macquarie><strong>LiveWire</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The ASX lithium trade has been both rewarding and debilitating at times over the last 2 years. Those who have endured the last bull and bear cycle have likely experienced both sides of the emotional ...</p>\n\n<a href=\"https://www.livewiremarkets.com/wires/watch-out-for-sharp-but-brief-price-drop-in-lithium-price-macquarie\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"GLN.AU","symbol_name":"GALAN LITHIUM LTD","start_time":0,"source_url":"https://www.livewiremarkets.com/wires/watch-out-for-sharp-but-brief-price-drop-in-lithium-price-macquarie","article_id":"2486013838","we_media_id":null,"thumbnails":[],"rights":{"source":"livewire_stock","url":"https://www.livewiremarkets.com/wires/watch-out-for-sharp-but-brief-price-drop-in-lithium-price-macquarie","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2486013838","pubTimestamp":1732593037,"sourceInfo":{"source_id":"livewire_stock","name":"Livewire Markets"},"weMediaInfo":null,"summary":"The ASX lithium trade has been both rewarding and debilitating at times over the last 2 years. Those who have endured the last bull and bear cycle have likely experienced both sides of the emotional investing rollercoaster.Many are playing the long game however, choosing to look through the recent valley in lithium minerals prices. It’s pretty simple, they argue. The energy transition has begun, and lithium is going to play a major role in the decarbonisation of the planet. These investors believe it’s just a matter of time until lithium demand again dwarfs its supply.Lithium Carbonate Futures  GFEX appear to have put in at least a short term bottom – but are hardly showing rapid price appreciation. Source: Carl Capolingua, SMM, GFEX. . In a recent article, I noted from a technical perspective, it appeared that at least a short term bottom in lithium prices appears to be in. Since then, the S&P Platts Global spodumene 6% price has increased by over 5% to US$815/t, up nearly 14% from it","collect":0,"end_time":0,"defaultTopTitle":"livewiremarkets.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"GLN.AU":"GALAN LITHIUM LTD","BK7504":"锂钴概念","BK7036":"特种化学制品","PMT.AU":"Patriot Battery Metals Inc.","BK7095":"多种金属与采矿","MQG.AU":"Macquarie","MIN.AU":"MINERAL RESOURCES LTD","BK7507":"资源股","PLL.AU":"PIEDMONT LITHIUM INC-CDI","BK7129":"钢铁","SYA.AU":"SAYONA MINING LTD","IGO.AU":"IGO LTD","GL1.AU":"Global Lithium Resources Limited","PLS.AU":"PILBARA MINERALS LTD","LTM.AU":"Arcadium Lithium plc","BK7506":"金矿股","BK7511":"ESG概念","A11.AU":"Atlantic Lithium Limited","BK7046":"综合性资本市场","LTR.AU":"LIONTOWN RESOURCES LTD","CXO.AU":"CORE LITHIUM LTD"},"translate_title":"麦格理表示，谨防锂价“大幅但短暂的下跌”","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"GL1.AU":1,"SYA.AU":1,"PMT.AU":1,"PLS.AU":1,"PLL.AU":1,"MQG.AU":1,"MIN.AU":1,"LTR.AU":1,"LTM.AU":1,"IGO.AU":1,"GLN.AU":1,"A11.AU":1,"CXO.AU":1},"content_text":"The ASX lithium trade has been both rewarding and debilitating at times over the last 2 years. Those who have endured the last bull and bear cycle have likely experienced both sides of the emotional investing rollercoaster.\nMany are playing the long game however, choosing to look through the recent valley in lithium minerals prices. It’s pretty simple, they argue. The energy transition has begun, and lithium is going to play a major role in the decarbonisation of the planet. These investors believe it’s just a matter of time until lithium demand again dwarfs its supply.\n\n\n\n\n\n\n\n\n\nLithium Carbonate Futures (Benchmark month, back-adjusted) GFEX appear to have put in at least a short term bottom – but are hardly showing rapid price appreciation. Source: Carl Capolingua, SMM, GFEX. (click here for full size image)\n\nIn a recent article, I noted from a technical perspective, it appeared that at least a short term bottom in lithium prices appears to be in. Since then, the S&P Platts Global spodumene 6% price has increased by over 5% to US$815/t, up nearly 14% from its October low, and benchmark January lithium carbonate futures have also rallied over 5% to RMB80,350/t, up nearly 13% from its respective low.\nMy “bottom is in” call is so far holding, and remains intact until new lows are printed (then the technicals revert to following the prevailing long term downtrend – it’s the dark pink zone in the chart above).\nA new research report from major broker Macquarie sheds further light on the current demand-supply dynamics in the lithium market, as well as several major ASX-listed lithium stocks. Let’s review the key points from the report.\nLatest lithium market demand-side factors\nIn the report, titled “Critical Minerals Chronicle: Lithium producers musical chairs”, Macquarie also notes that lithium’s downward price trend has “moderated” since August. The key demand-side factor contributing to the stabilisation of the downtrend has been seasonal restocking of lithium chemical inventories, particularly in October and November, ahead of the usual shutdown in processing and battery production over the Lunar New Year holiday in late-January-early-February.\nThe big risk, notes Macquarie, is when this restocking tapers off, lithium minerals are at risk of suffering “a sharp but brief price drop”. Timing? Macquarie warns restocking will begin to taper in December, and January could be a major risk month for lithium minerals prices.\nChina remains the primary driver of lithium demand due to robust growth in plug-in vehicle sales, bolstered by subsidies and new model launches. Macquarie notes that year-to-date, China's plug-in sales have grown by 40% year-over-year, with an average market penetration of 46.7%. However, this strength contrasts with weaker EV sales in the U.S. and Europe, tempering global demand growth.\nLatest lithium market supply-side factors\nMacquarie identifies three major factors influencing the supply side of the lithium minerals price equation now and likely in the medium term.\n\n\nFactor 1: Production curtailments and supply adjustments\nNegative supply-side responses have intensified during 2024 as subdued lithium prices have ramped up the pressures on high-cost producers. According to Macquarie, key developments include:\n\nLiontown Resources (ASX: LTR): Reduced its mining rate by 7% to 2.8 mtpa at its maiden 2H FY25 production guidance release.\nMineral Resources (ASX: MIN): Suspended its Bald Hill operation (~16ktpa lithium carbonate equivalent (“LCE”)) and one train at Mt Marion (~12ktpa LCE). The company also delayed the Wodgina three-train strategy.\nPilbara Minerals (ASX: PLS): Cut production by suspending operations at the Ngungaju plant (~12ktpa LCE).\nLepidolite operations in China: CATL’s Jianxiawo mine, with a nameplate capacity of ~90ktpa LCE, has reduced production by approximately 40ktpa LCE due to high costs.\n\nThese curtailments have partially alleviated market oversupply, notes Macquarie, who now forecasts a surplus of 62kt LCE in CY24 and 120kt LCE in CY25.\n\n\n\n\n\n\n\n\n\nFigure 8 - AISC estimate for major Lepidolite supplies. Source: Company data, Macquarie Research, November 2024. From “Critical Minerals Chronicle: Lithium producers musical chairs”, Macquarie Research, 25 November 2024. (click here for full size image)\n\nFactor 2: Financial pressures on smaller producers\nMacquarie observes that smaller producers and developers are facing increased cash flow challenges, leading to business mergers and production halts. Notable examples include the recent merger between Sayona Mining (ASX: SYA) and Piedmont Lithium (ASX: PLL), as well as Arcadium Lithium’s (ASX: LTM) decision to suspend waste stripping at Mt Cattlin and move operations to care and maintenance by mid-CY25.\nThese actions reflect a broader trend of consolidation and financial strain among less competitive players.\n\n\nFactor 3: African and low-grade producers face challenges\nMacquarie notes that African producers have reduced petalite shipments to downstream refineries due to negative margins, while low-grade lepidolite suppliers in China have also cut uneconomic output.\nMacquarie warns that whilst these adjustments have helped to stabilise lithium minerals prices more recently, they are unlikely to be sufficient to completely eliminate further downside risk.\n\n\n\n\n\n\n\n\n\nFigure 7 - AISC estimate for major African supplies. Source: Company data, Macquarie Research, November 2024. From “Critical Minerals Chronicle: Lithium producers musical chairs”, Macquarie Research, 25 November 2024. (click here for full size image)\n\nLithium price forecasts\nPutting the above demand-side and supply-side factors together, Macquarie concludes lithium minerals prices are likely to remain range-bound in the near term, with support around RMB70,000/t and resistance at RMB90,000/t for lithium carbonate. The current price for lithium carbonate is approximately RMB80,000/t.\nAbove RMB90,000/t, suggests the broker, the market could again be awash with supply as suspended production capacities return. Just a reminder here also of the potential for a “sharp but brief price drop” in December and January as restocking activities ease in line with seasonal patterns.\nASX-listed lithium stocks updates\nMacquarie provides updates on several lithium stocks within its coverage. Here are the main points from each update, as well as the broker’s current rating and target price for each stock:\n\n\n\nIGO Limited (ASX: IGO)\n\nRating: NEUTRAL | Target Price: $5.60\nCompetitive position: Greenbushes mine remains the lowest-cost lithium producer, excelling in metrics that include sustaining and total capex.\nRisks: Expansion plans at Greenbushes and Kwinana Hydroxide, along with potential developments at Cosmos and Mt Goode, underpin IGO’s valuation. Variances in outcomes at these projects present the greatest risks. Volatility in spodumene and nickel prices also pose risks to earnings.\n\n\n\nMineral Resources (ASX: MIN)\n\nRating: NEUTRAL | Target Price: $35\nCompetitive position: Cash costs for Mt Marion and Wodgina are above current spodumene prices, though recent cost-reduction measures may improve financial performance. The delayed Wodgina three-train strategy adds uncertainty.\nRisks: Variability in iron ore prices and spodumene prices also pose risks to earnings.\n\n\n\nPilbara Minerals (ASX: PLS)\n\nRating & Target Price: N/a\nCompetitive position: The suspension of Ngungaju (~12ktpa LCE) has impacted output. However, PLS maintains the second-lowest cash costs after Greenbushes, supported by its organic growth initiatives (P680 and P1000).\nRisks: While sustaining capex remains manageable, the company faces challenges in scaling new projects.\n\n\n\n\n\n\n\n\n\nFigure 6 - Cash unit costs estimate – FY25. Source: Company data, Macquarie Research, November 2024. From “Critical Minerals Chronicle: Lithium producers musical chairs”, Macquarie Research, 25 November 2024. (click here for full size image)\n\n\n\nLiontown Resources (ASX: LTR)\n\nRating: UNDERPERFORM | Target Price: $0.60\nCompetitive position: Underground development at Kathleen Valley contributes to higher costs, with operating costs estimated at A$1,170-1,290/t and total costs (operating expenditure plus total capital expenditure) potentially reaching A$1,430-1,550/t under certain assumptions. Growth capex of A$42-50m adds to potential financial strain.\nRisks: Geotechnical challenges and ramp-up uncertainties for both open-pit and underground mining increase the risk profile.\n\n\n\nSayona Mining (ASX: SYA) and Piedmont Lithium (ASX: PLL)\n\nRating:  NEUTRAL and NEUTRAL | Target Price: $0.04 and $0.21\nCompetitive position: The 50/50 all-stock merger removes price caps and offtake agreements, enhancing the value of the North American Lithium (NAL) project and paving the way for brownfield expansion.\nRisks: Variances in the spodumene price, as well as in capital and operating costs.\n\n\n\nCore Lithium (ASX: CXO)\n\nRating: UNDERPERFORM | Target Price: $0.09\nRisks: Variances in the spodumene price, as well as AUD/USD volatility.\n\n\n\nGlobal Lithium Resources (ASX: GL1)\n\nRating: UNDERPERFORM | Target Price: $0.21\nRisks: Boardroom uncertainty, variances in the spodumene price, as well as AUD/USD volatility.\n\n\n\nPatriot Battery Metals (ASX: PMT)\n\nRating: OUTPERFORM | Target Price: $0.70\nRisks: The lack of a maiden resource for the Corvette project introduces significant risk to assumptions around scale, capital costs, and operating costs.\n\n\n\nGalan Lithium (ASX: GLN)\n\nRating: NEUTRAL | Target Price: $0.14\nRisks: Variances in the lithium carbonate price, as well as AUD/USD volatility.\n\n\n\nAtlantic Lithium (ASX: A11)\n\nRating: NEUTRAL | Target Price: $0.30\nRisks: Variances in the spodumene price, Ewoyaa development project mining inventory assumptions.\nConclusions\nIt appears from Macquarie’s latest research, that the lithium market is at a pivotal juncture. In the bigger picture, demand is being driven by China’s growing but dynamic (greater mix of lower-lithium intensive hybrid vehicles) EV growth, but in the short term is more beholden to seasonal variations.\nOn the supply side, Macquarie noted that production curtailments and financial pressures on high-cost producers have introduced volatility, while mergers and cost-control measures seek to rationalise the operations of several major global players.\nOn ASX-listed lithium miners, Macquarie points out a broad spectrum of cost competitiveness and strategic positioning, presenting investors with both opportunities and risks. Those risks are closely tied to pricing dynamics, project execution, and general market and industry confidence.\nTranslation: There is no clear path at least in the short term back to the strong lithium minerals price gains enjoyed by investors in 2021 and 2022. Opportunities will present themselves, but investors will need to be on their toes in 2025!\n\n\n\n\n\n\nThis article first appeared on Market Index on Tuesday 26 November 2024. \n\n \n\n\nNever miss an update\n\n    Enjoy this wire? Hit the ‘like’ button to let us know. \n    Stay up to date with my current content by \n    following me below and you’ll be notified every time I post a wire","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2486013838"}