Orocobre sees lithium market recovery emerging

The weakness in lithium prices has persisted for longer than expected, but a recovery is seen when the global battery supply chain reaches more manageable inventory levels, Argentina-focused lithium producer Orocobre said.

Demand has been subdued as a result of slower Chinese electric vehicle (EV) growth, cathode and battery challenges, the US-China trade war and lower energy storage solution demand following some safety incidents, the Brisbane-headquartered company said in comments accompanying its production data for July-September.

"A strong acceleration in market demand growth is expected in the medium to long term as EV manufacturing profitability improves, total costs of EV ownership reduce and battery technology objectives within the EV and energy storage solutions sectors (including energy density, range and safety) are achieved," it said.

Orocobre's Olaroz plant in Argentina produced 3,093t of lithium carbonate in July-September, the first quarter of its July 2019-June 2020 fiscal year. This was 35pc higher than a year earlier and the highest July-September output on record. This was a result of managing brine quality and new pond preparation and tailoring production to seasonal conditions.

Reflecting the weakness in the overall lithium market, sales revenue of $22.1mn was 21pc lower than in the April-June quarter, with the average realised price falling by 13pc to $7,111/t. Sales volumes of 3,108t for July-September were 8pc lower than in April-June.

Gross cash margins of $2,226/t — excluding export tax — were 40pc lower than in April-June, mainly because of lower prices. Cash costs of $4,885/t were 9pc higher than in April-June, excluding the export tax of $420/t.

In its expansion projects, Orocobre reported progress on the second stage of Olaroz and on the 10,000 t/yr Naraha lithium hydroxide facility being built in Japan with partner Toyota Tsusho. The budget for the project has been increased to $90mn, with $35mn spent by 30 September. Detailed engineering for a carbonate plant for the second stage of Olaroz is underway and expected to be completed by the end of this year.