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Turmoil in the market: Pilbara Minerals’ revelations

Pilbara Minerals (ASX:PLS), a major player in the global lithium market, has disclosed a staggering collapse in lithium prices. The nosedive, confirmed via the company’s announcement, underscores the tumultuous journey of this crucial battery material from its peak in late 2022 to the present, marking a decline exceeding 80%.

Pilbara Minerals unveiled this revelation, affirming contentment with lithium prices for its spodumene product, which now stand at a remarkable 81% to 85% lower than those announced in late 2022, alongside a revamped pricing structure for 2023.

The company detailed a sharp plummet of $US7,099 per tonne in its recent announcement, juxtaposing this against the figures from the final Battery Materials Exchange (BMX) auction in December 2022—a staggering 85% drop. Even when compared to the adjusted pricing announced later in December 2022 for the 2023 shipping year, the decline remains substantial, albeit slightly lesser at 81%.

Pilbara Minerals disclosed that it had presold its intended auction stock of 5,000 tonnes of spodumene, slated for next week’s auction via BMX. This unexpected turn of events indicates a swift and drastic market shift.

The auction, originally scheduled to commence on Monday, has been disrupted as the company confirmed the sale of the entire cargo for delivery in December 2024. Pilbara Minerals accepted a bid of $US1,106 per tonne (CIF China) for its 5.5% grade spodumene concentrate, equivalent to $US1,200 per tonne for a standardized 6% grade spodumene concentrate (CIF China).

Comparing this to the last BMX auction in December 2022, where two cargoes totaling 10,000 tonnes were sold at $US7,552 per dry metric tonne, reflects the monumental price depreciation in a short span.

Pilbara Minerals’ statement in late December 2022 highlighted a drastic price revision, announcing an average SC6.0 equivalent price of approximately US$6,300 per dry metric ton (CIF China) for 2023. This marked a staggering 24% price decrease in just a week from the BMX auction announcement dated December 14, 2022.

The latest announcement echoes an 81% drop from the 2023 pricing figure, emphasizing the relentless downward spiral in lithium prices.

Pilbara Minerals made it explicit that the pre-auction sale had depleted its surplus material, effectively halting further auctions for the remainder of the year. With production volumes for 2024 predominantly committed to offtake agreements, prospects for regular spot sales via BMX throughout 2024 appear bleak.

The company iterated its commitment to exploring diverse sales avenues to optimize shareholder value, encompassing offtake contracts, closed tenders, auctions, and other commercial opportunities.

In this climate of uncertainty, Albemarle emerges as a notable exception, poised to initiate auctions of Australian-sourced spodumene starting March 26. Amidst the industry turmoil, these auctions may serve as a beacon of transparent pricing amidst an otherwise opaque market landscape.