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SQM put out its Q1 results this week, and while the world’s biggest lithium producer reported decreased revenues, there was a bit of good news for the lithium space. The company said the lithium price was higher for the quarter, noting that overall it expects it to be higher than it was in 2014.
Specifically, the company’s revenues were down about 27 percent relative to the first quarter of 2014, with revenues from its lithium business down about 7 percent, at US$48.6 million, year-over-year. However, the company also reported that the lithium price was nearly 10 percent higher relative to the fourth quarter of 2014. Overall it expects the price this year to be higher than it was in 2014.
“Our sales volumes were strong during the first quarter, and we expect to finish the year with volumes slightly higher than volumes seen in 2014,” said SQM CEO Patricio de Solminihac in a statement, adding, “[t]he lithium business continues to see strong market growth, and average prices during the first quarter were close to 10% higher than prices seen during the fourth quarter of 2014.”
The company notes in its release that demand in the lithium market “remained strong” for the quarter, mainly led by growth in the battery industry. And certainly, despite all the excitement surrounding Tesla Motors’ (NASDAQ:TSLA) unveiling of its new suite of home-use lithium-ion batteries, the company’s upcoming gigafactory isn’t the only game in town.
“Batteries are rising in demand without the gigafactory,” said Simon Moores of Benchmark Mineral Intelligence. “China in particular is seeing strong demand. Strong sales of products like the Apple (NASDAQ:AAPL) iPhone 6 have a direct impact on the price of lithium. With the way the individual consumer uses battery-powered devices today, this isn’t changing … it’s only going to get more extreme.”
On top of that, Moores noted that electric vehicles, which use even bigger batteries, haven’t taken off yet. And while Tesla’s new home and commercial-use batteries are already sold out through mid-2016, that market hasn’t truly taken off yet either.
“Everything we have heard and seen on the supply and demand side is pointing to higher prices in carbonate and hydroxide,” Moores said. “It’s quite a simple result of stronger demand with stagnant supply.”
SQM also states in its release that there have been delays in bringing new lithium projects online. It expects that projects scheduled to come online in 2015 will supply less than previously anticipated for the year, and suggests in a release on its Q1 earnings conference call that a scenario of strong demand/delayed supply is “creating the sensation of a tight market.”
Also commenting on the news, Chris Berry of House Mountain Partners and the Disruptive Discoveries Journal said he still believes it will take until about 2017 before lithium demand firmly outpaces supply. “Keep in mind that lithium is an oligopoly and an overall very small market,” he said, pointing out that the limited number of players in the space still have the ability to “effectively set the price” of lithium. For example, it would be in their interest to raise the price enough to cover costs and respond to demand, but not so much that it would invite new players who could take away market share.
In any case, investors interested in the technology metals space will be watching closely for more news on the lithium price.
Company news
Bacanora Minerals (TSXV:BCN,LSE:BCN) reported results from 22 drill holes at the La Ventana concession at its Sonora lithium project in Mexico, as well as from one hole drilled at its Fleur concession. According to the company, the results confirm its recently updated mineral resource estimate for the project: 1.12 million tonnes of lithium carbonate equivalent (LCE) at 2,200 parts per million (ppm) lithium in the indicated category and 6.3 million tonnes LCE at 2,300 ppm lithium in the inferred category.
Meanwhile, Australia’s Potash West (OTC Pink:PWNNY,ASX:PWN) announced the first continuous production of lithium carbonate using the L-max process from a small-scale plant run by Lepidico. Potash West owns 25 percent of Lepidico. Operations were carried out using Ledpifolite ore — a lithium-rich mica — supplied by Cobre Montana (ASX:CXB).
“This is an important step in the development of the L-Max technology and the demonstration of its applicability to lithium extraction,” said Potash West’s managing director, Patrick McManus.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Potash West and Cobre Montana are clients of the Investing News Network. This article is not paid-for content.
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