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How much does lithium cost? The industry does not seem to agree

SANTIAGO (Reuters) – Opac pricing for lithium, power plant metal burning electric vehicle revolution, is expected to be busy this week as industry leaders gather in Santiago, with calls rising for more transparency to attract much needed expansion finance.

FILE PHOTO: Brine powder from a lithium group belonging to the American-based Albemarle Corp seen on the Atacama salt surface of the Atacama desert, Chile, August 16, 2018. REUTERS / Ivan Alvarado / Filfoto

Unlike copper or other metals such as Used to make electric cars, there is no traded price for lithium. The London Metal Exchange is working to develop a negotiable price for the white metal, but until then, industry investors, customers, analysts and managers are left without the full understanding of the global market.

"The fact that it is not a reference price means that some of the banks have not been concerned about getting involved because they cannot claim their price risk," said William Adams, analyst at Fastmarkets, who is hosting the Santiago conference and vying to being a price provider for the LME contract.

For now, the industry seizes any scuttlebutt it can find, with data that works on prices for the spodum, a hard rock containing lithium, prices for hydroxide or carbonate, the two main types of lithium used in batteries; or prices paid by battery manufacturers across China, Japan and South Korea.

"You are almost forced to just take the average of the estimates out there," said James Calaway, head of the ion Ltd. Developing a Lithium Project in Nevada

While spot prices in China have fallen two digits since January due to uncertainty around the country's electric car subsidies, these prices reflect only part of the global demand.

Some companies, including world-leading Albemarle Corp., sell almost all their lithium on long-term contracts and are not affected by Chinese spot prices, a difference many on Wall Street do not seem to make.

Albemarle's share is down 12 percent since January.

"China's spot price is what the market is looking at, and until it picks up meaningfully, the mood will be negative," said Howard Klein, a lithium analyst and partner with New York-based consulting firm RK Equity. "But the demand is there."

SQM, which eliminates long-term contracts, said that lithium prices in the quarter fell 11 percent, which paused the expansion plans in the Chile Atacama desert.

Livent Corp, operating in Argentina, cut its forecast for 2019 and warned that demand slides for a version of lithium it produces in China and will sell product elsewhere.

Since January, SQM's shares have been down 19 percent and Livents shares have lost 53 percent.

"Investors are considering the industry based on the worst they hear from just a handful of companies because they do not have a base price reference price," said Ernie Ortiz, president of Lithium Royalty Corp., a affiliate of Waratah Capital Advisors, who buys lithium royalty rights.

Many long-term supplier contracts already refer to an LME price, an expected step to setting future contract parameters, Ortiz said.

"LME continues to launch a lithium contract, in close collaboration with industrial users," said LME spokeswoman Bianca Blake. In addition to Fastmarkets, Argus and Benchmark Minerals vying to deliver lithium pricing data, a decision is expected "shortly", Blake said.


Even with price uncertainty, demand is spiking. Toyota Motor Corp., for example, plans to have half its global sales, coming from electric vehicles by 2025.

Lithium industry's largest players are including new expansion agreements as a result. Albemarle last year signed a $ 1.15 billion joint venture contract with Mineral Resource Ltd to own and operate the Wodgina lithium mine in Western Australia, an agreement that expands Albemarle's skill with Asian customers.

Ganfeng Lithium Co, which already has several Australian ventures, spent $ 160 million to increase its share in a lithium project from Argentina with Lithium Americas Corp.

Tianqi Lithium Corp, the world's largest lithium deal, paid $ 4.1 billion last year for a stake in the SQM quarter, part of a pressure from Chinese companies for more lithium access.

However, small and medium-sized players find it difficult to obtain funding as potential financiers, without a negotiable lithium price, which will allow them to secure investment.

Neo Lithium Corp, the Ion, Standard Lithium Ltd, Sigma Lithium Resources Corp and other potential lithium projects have all struggled to attract investors largely because of this price uncertainty.

"Greater transparency is hardly needed," says Jake Fraser, a metal analyst with Roskill.

FILE PHOTO: Aerial view of salt water pools at the SQM lithium mine on the Atacama salt surface in the Atacama desert in northern Chile, January 10, 2013. REUTERS / Ivan Alvarado / Filfoto

A traded lithium price would make conversations with potential customers or fund a lot easier, said Carlos Vicens, CFO at Neo Lithium, who is developing an Argentine lithium deposit.

"Our main focus is to get a finance, a strategic partner, to get this project started as soon as possible," Vicens said.

(For a graphic at the Game of Mines click

Reporting by Ernest Scheyder; Additional reporting by Dave Sherwood; Editing by James Dalgleish

Our Standards: Thomson Reuters Trust Principles.

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