The Zhitong Finance App learned that analysts said that considering that sales of electric vehicles are lower than expected, Australian lithium producers may track project cuts and extensions in the nickel industry and make adjustments during this earnings season, but the impact is not expected to be that serious.
Both industries are dealing with a sharp drop in raw material prices due to the slowdown in the development of electric vehicles, but lithium prices are expected to pick up faster because their oversupply is seen as a short-term phenomenon.
First Quantum (FQVLF.US) said nickel miners are under pressure due to a surge in supply in Indonesia, which impacted nickel prices and triggered a series of asset write-offs, which indicates that the market structure is undergoing a transformation, which is likely to continue for three years.
Canaccord's Sydney-based analyst Reg Spencer said: “If prices remain low for a long time, there may be additional capacity cuts and/or delays, or delays in new projects and production capacity.”
“(But) the energy transition isn't over; it's just a period of slowing demand growth,” he added.
According to information, Core Lithium (CXOXF.US) announced layoffs on January 5 and suspended mining at its Finiss business in Australia's Northern Territory. At the same time, Liontown Resources also had to return to the market to restructure its debts on Monday, causing its stock price to plummet by more than a quarter.
Glyn Lawcock, a senior analyst at Sydney investment firm Barrenjoey, said that since the end of 2021, lithium prices have soared sixfold, and lithium miners like Pilbara Minerals (PILBF.US) have established cash buffers to protect against price reversals.
But he added that if customer demand decreases, even cash-rich miners may seek to cut spodumene production because chemical producers face excessive existing stocks, and lithium products only have a shelf life of six months.
“We're watching to see if there are any signs that customers don't need that much spodumene right now,” he said.
Previously, the world's largest low-cost lithium mine, Greenbushes lithium mine in Western Australia, had suspended production, and IGO Ltd (IPGDF.US) said in September last year that it might cut production.
A joint venture between Tianqi Lithium (09696), IGO, and American Yabao (ALB.US) produced 1.49 million tons of spodumene in the FY2022 to 2023. Tianqi Lithium and IGO also own the Kwinana lithium hydroxide refinery, which has been operating below normal production capacity.
IGO has announced a further write-down of its Cosmos nickel project. On January 31, at the same time as the new CEO Ivan Vella takes office, IGO will release financial reports. Investors are expected to closely monitor the company's lithium development and plans to develop a battery chemical plant near Perth.