Lithium prices return to record highs at Pilbara Minerals' spodumene auction

Sustained demand for batteries across many industries is keeping lithium prices higher for longer as Pilbara Minerals (ASX: PLS) logged another record spodumene auction result on Tuesday night.

The auction for a cargo of 5,000 dmt received strong buying interest from a broad range of qualified buyers, with the highest bid coming in at US$6,350/dmt, matching the previous record auction result in June.

Auction results history

In US dollars, quarter-on-quarter percent change:

• Jul 21: $1,250

• Sep 21: $2,240 (+79%)

• Oct 21: $2,350 (+5%)

• Apr 22: $5,650 (+140%)

• May 22: $,5,955 (+5.4%)

• Jun 22: $6,350 (+6.6%)

• Jul 22: $6,188 (-2.55%)

• Aug 22: $6,350 (+2.62%)

A cashed up Pilbara Minerals

Pilbara Minerals lifted its cash position by $589.3m in the June quarter to $874.2m.

Credit Suisse projects Pilbara Minerals to deliver real free cash flow yields of around 14% in FY23-24.

The investment bank forecasts the company to sit on an outsized $1.9bn cash position at the end of FY24, which supports further capital management upside and dividends.

Still, analysts warned the Pilbara Minerals has the greatest downside exposure to any weakening macro, which may render the company susceptible to margin compression amid weakening supply and demand fundamentals.

US-China tensions

China's Contemporary Amperex Technology (CATL), the world's largest supplier of batteries for electric vehicles, has pushed back its plans for a multi-billion dollar North American plant due to rising US-China tensions raised by House Speaker Nancy Pelosi's trip to Taiwan, people familiar with the process told Bloomberg.

CATL is now expected to wait until September or October to make the announcement. The plant was supposed to supply household EV names like Ford and Tesla.

Fragile US-China relations could further impact big deals between the two countries.

Lithium deficit roadmap

"As companies and countries continue to eye net-zero targets and generate energy transition plans, the already growing global demand for lithium is poised to pick up momentum," said S&P Global Market Intelligence.

"Even if all lithium projects expected to be online by 2030 are perfectly executed, there is still a 220,000 mt gap to the 2m mt in expected demand in 2030," the report warned.

By 2025, S&P Global expects 84% of all lithium produce to be used in batteries for electric vehicles, energy storage systems and portable electronics by 2025.

Pilbara Minerals share price chart