Lithium prices break out to all-time highs but stock performance remains varied

Tue 18 Oct 22, 1:28pm (AEDT)
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Source: iStock

Key Points

  • Chinese lithium carbonate prices pushed above the longstanding 500,000 yuan a tonne mark last week
  • Pilbara Minerals recorded its first ever auction result above US$7,000 a tonne
  • Lithium stock performance remains varied among producers and explorers

It's another record breaking week for the lithium market as both Chinese battery grade lithium carbonate and spodumene concentrate prices rallied to fresh all-time highs.

Lithium carbonate prices in China hit 537,500 yuan (US$74,500) a tonne, up more than 100% year-to-date, according to Benchmark Mineral Intelligence.

On Monday, Pilbara Minerals (ASX: PLS) said it accepted a pre-auction bid of US$7,100 a tonne. Offers were made available for sale to a group of registered participants prior to the proposed auction scheduled for Tuesday, 18 October.

It seems like someone was desperate to take the cargo off the market.

Market defying prices

Pilbara Minerals locked in another record auction result, the first ever above the US$7,000 a tonne mark.

The company's first spot market auction was held in July 2021, where the cargo sold for US$1,250 a tonne.

Year-to-date auction results (US$, month-on-month price change):

  • April: $5,650

  • May: $,5,955 (+5.4%)

  • June: $6,350 (+6.6%)

  • July: $6,188 (-2.55%)

  • August: $6,350 (+2.62%)

  • September: $6,988 (+10%)

  • October: $7,100 (+1.6%)

To add some perspective, consensus spodumene concentrate forecasts expect prices to sit around US$3,200 in FY23 and US$2,750 in FY24, according to Core Lithium's (ASX: CXO) recent equity raising presentation.

Long run estimates expect prices to fall to below US$1,000.

A stock pickers market

In a bull market, a record breaking price headline would see a sea of green for lithium stocks. Unfortunately, in this climate, not all lithium names are made equal.

A recent trend among the lithium sector is the outperformance of large cap names like Allkem (ASX: AKE), Mineral Resources (ASX: MIN) and Pilbara Minerals. The three heavyweights are trading around -10-15% off recent all-time highs.

Fundamentally, this makes sense as they are the only companies that can capitalise on current sky-high prices. Instead of emerging names that might hit producer status in the medium to long term.

There are of course a few small to mid caps that have held up relatively well, including Argosy Minerals (ASX: AGY) and Global Lithium (ASX: GL1).

But there's a much longer list of explorers like Arizona Lithium (ASX: AZL), Lithium Power International (ASX: LPI) and Ioneer (ASX: INR) that are trading more than 30% away from all-time highs.

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Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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