Commodity spotlight: Aluminium and fertiliser prices dip, Goldman is wrong about lithium
Sizeable declines for both aluminium and fertiliser prices, and 5 reason lithium has more legs
Source: iStock
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KEY POINTS
- Chinese aluminium exports jump to 9-year highs, sending prices lower
- Benchmark Minerals has 5 fundamental reasons why Goldman is wrong about lithium prices
- Fertiliser affordability is taking a toll on prices, even as food prices remain high
Aluminium under pressure
China exported 676,605 tonnes of unwrought aluminium and products in May, the highest volume in 9 years, according to data from the General Administration of Customs. The spike in Chinese exports has turned the country into a net exporter of aluminium.
On the demand side, aluminium smelters in Europe continue to curb production due to high power prices.
Bloomberg's Aluminium futures index made a notable drop on Thursday, down -6.3%.
Perhaps why South 32 (ASX: S32) and Alumina (ASX: AWC) are both down around -4% on Friday.
Source: TradingView
Lithium: Goldman got it wrong
Chinese lithium carbonate prices picked up slightly this week, up around 5% to 474,500 yuan (US$71,000) a tonne.
Source: TradingEconomics
Benchmark Minerals released an interesting piece on 5 reasons why Goldman Sachs is wrong about lithium oversupply. In short:
Industry cannot rely on China feedstock to meet market demand
Capacity does not equal supply
New lithium supply comes at a higher cost base
Contract pricing is important as the market balances. There is no single lithium price
Understanding how lithium chemical capacity used is crucial
Its worth noting that while Chinese lithium prices are starting to stabilise, ASX-listed lithium stocks have not. The risk-off attitude that has taken over the market has smashed most lithium names down 5-15% this week.
Fertiliser prices fail to keep up with food prices
Affordability has taken quite a toll on fertiliser demand, including urea, potash and phosphate.
North American fertiliser prices have fallen around -25% since March all-time highs.
Source: CRU Group
Its interesting to observe a sharp pullback in fertiliser prices despite relatively high prices for agriculture (cough $12 lettuce).
Notable stocks in this space include:
As well as emerging potash stocks like BCI Minerals (ASX: BCI), Highfield Resources (ASX: HFR) and Agrimin (ASX: AMN).
