Diggers and Dealers: Forget Trump, miners remain bullish ‘scarcity pricing' will return for lithium

News.com.au

a day ago

Lithium miners have fronted up at 2025's gold-dominated Diggers and Dealers
Liontown's Tony Ottaviano and others say the limelight on EV-hating Donald Trump has obscured a strong demand growth outlook outside the US for the battery metal
PLS' Dale Henderson says it's too early to say whether the market has bottomed
North American EV demand growth has ground to a halt under the policies of America's Republican strongman Donald Trump.
But lithium miners say market watchers obsessed with the orange man's EV animus are missing a trick, with demand continuing to grow sharply as low prices stall supply growth.
Rising Chinese-backed production at home and in Africa helped turn a lithium bull run into a second lithium winter, with spodumene prices crumbling from US$8000/t at the start of 2023 to US$600/t at their ebb in June.
They have since rebounded to US$775/t, giving a glimmer of hope that the dark days could soon be behind the battery metals sector.
Tony Ottaviano, the head of WA's newest lithium miner, the Gina Rinehart backed Liontown Resources (ASX:LTR), is confident 'scarcity pricing' will reemerge after low prices caused miners to pause or curtail operations and delay mine builds.
"Currently, we estimate the oversupply to be in the tune of 120-130,000 tonnes," he said at the Diggers and Dealers Mining Forum in Kalgoorlie.
"So based on that maths, a year and that oversupply will be consumed.
"Then what is being built today to take on that new growth? If there are no new projects that are actually in construction now, it'll be three to five years before something gets built.
"I can see the industry and believe me, I've been in this a long time, that we will see history repeating itself. We will get this, you know what they call it? Scarcity pricing come back in."
Price signal
Much of the additional supply has come from lower grade lepidolite operations opened in China by vertically integrated battery and EV giants like BYD and CATL.
Speaking just months after opening the Kathleen Valley gold mine near Leinster in WA, Ottaviano says as demand outside China grows and the market gets larger, their influence on pricing should wane.
Miners are keen to see the development of a more mature market with more transparent price signals.
" You cannot have this sort of boom-bust and these amplitudes. You need … that steady price signal to keep that incentive going so that we can get rational new supply coming on."
Dale Henderson, managing director of Pilbara Minerals (ASX:PLS), the ASX's lithium bellwether with its large Pilgangoora mine, says lithium needs a spot market place and "the right" futures exchange to enable more transparent price discovery.
Volatility in spodumene and lithium carbonate pricing, including a recent surge that floated the boats of the ASX lithium sector, has been closely linked to speculative trading on China's Guangzhou Exchange.
"It's essentially the only futures market, at this time," Henderson said.
" To determine if that's the futures market to back, you've got to look closely at it and I couldn't offer an opinion on that.
"I know some have expressed concerns around it because of its own volatility and who's actually trading on that? But regardless whether it's Guangzhou or another exchange, we need one or more very healthy exchange to help guide a healthy market."
Demand on the up
Where lithium exponents are united is their belief that the market is continuing to grow ... and fast.
Ottaviano pointed to strong growth rates in China and Europe, noting the media's focus on Trump was obscuring green shoots elsewhere.
Patriot Battery Metals (ASX:PMT) MD Ken Brinsden, the former PLS boss whose new company owns North America's largest hard rock lithium deposit at Shaakichiuwaanan in Canada's James Bay region, said the US market was currently irrelevant for the EV story.
Henderson pointed out that mass energy storage, a market his former boss Brinsden believes will come to outstrip EVs, is growing at a rapid and previously unforeseen rate.
The current PLS boss thinks we could be headed in that direction.
"What we saw for last calendar year is the mass energy storage spoke to approximately 15% of the total demand," he said.
"But what was interesting about last year is that subset had grown by approximately 50% from the prior year.
"Now as we step into this calendar year, that stronger growth rate, stronger than EVs, is continuing at least so far this year.
"Now, if that carries forward, it will end up eclipsing, being a larger subset of the total lithium demand."
Price rebound?
What every lithium bull, and there are few left, is being asked in Kalgoorlie is: when will prices turn around?
Miners are loathe to put a date on it, though Henderson thinks the time spent deep in the cost curve and recent curtailments suggests the worst could be in the rear view mirror.
Canaccord Genuity analyst Tim Hoff said the market would tighten, even with the US EV market flat.
"We wrote a report a few weeks ago where we we went through our supply-demand and where we landed," he told Stockhead.
"The last time we ran this report was in February. We were cautious on global demand, given how the US was performing and that has performed to our expectations – in terms of the USA, growth is basically flat.
"However, the rest of the world and China are growing EV market share rapidly. We see adoption of these vehicles. Here in Australia, you can see it out on the roads every single day.
"And so the EV demand story rolls on, the energy storage demand story rolls on – where America is actually leading the charge there. Australia will soon be putting in a lot of storage as well. And so that's strong.
"So we're looking for a demand-led recovery. Prices are low enough to have stopped the supply additions.
"We expect things to improve."