ORL Q Results & Lithium NewsHere is from ORL's Q Report:
tiger
LITHIUM MARKET
The lithium market was impacted by similar factors during the September quarter as the previous quarter leading Chinese spot prices to fall below the seaborne contract market.
China
Spot prices in China remained under pressure by the change in China's subsidy policy announced earlier in the year which had an enduring impact on lithium demand with key cathode/battery manufacturers including CATL and BYD announcing new nickel-based battery capacity will come online early 2019. The Chinese spot market was also weighed down by broader macro-economic concerns regarding China's economy, particularly the potential impact of trade wars leading some commentators to believe China may be heading toward current account deficit due to a trade imbalance (source: Shanghai Metals Markets). This encouraged continued destocking of raw materials throughout the battery supply chain.
Some additional lithium carbonate volume also entered the market from the brine producers in the Qinghai region with an aggressive pricing approach at seemingly unsustainable levels. This additional volume at marginal prices has had a direct impact on spot market prices within China and a flow on effect to some customers outside of China who have downstream exposure to the China market. The Qinghai region has historically experienced reduced lithium carbonate production levels through the imminent winter season and it is expected that this will be the case again this year.
Supply
The market had expected improved supply conditions particularly from converters receiving new Australian spodumene concentrate supply, however these projects are expected to reach completion within the next six months and will require a period of commissioning and customer qualification that has not been accounted for by many market forecasts. Conversion plant projects which were scheduled to come online this year have lagged the announced timelines due to a number of factors including availability of credit and ability to service debt, overly-optimistic project timelines of less than two years, and/or difficulties transitioning from commissioning to production. Furthermore, exports of direct shipping ore (DSO) continued to decrease as DSO suppliers decided to focus investment on producing high quality spodumene concentrate.
Outlook
Despite subdued spot market conditions, key suppliers to the contract market maintained an optimistic, long-term perspective with demand forecasts provided by South American producers SQM and Albemarle remaining in the range of 18% to 20% CAGR for 2018 to 2025. During the quarter, the market was reminded of the difficulties involved in ramping up operations. SQM provided updated guidance on FY18 production reducing the initial estimate of ~55ktpa LCE down to between 45ktpa and 50ktpa citing a delay in the ramp-up of their expanded Chile carbonate capacity and 'logistical challenges given low inventory levels'.
Summary
The market in China has experienced some volatility linked to changes in the EV subsidy policy, a subsequent shift toward high nickel cathode, some new supply entering the market from the Qinghai region and some macro-economic factors. However, the overall supply and demand market picture has not altered significantly. The Company's view remains that tight market conditions will persist with some lumpiness or variability to be expected as the market grows, and at times, becomes more exposed to short-term macro-environmental factors.