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Auction, Citi re-rate send lithium stocks lower

Share prices of lithium companies took another fall yesterday after the latest Battery Materials Exchange (BMX) online lithium auction from Pilbara Minerals saw a small fall in prices of around 3.2% from the record highs of November.

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Some commentators blamed a downgrade from Citi for the damage – that follows a negative report last week from Goldman Sachs.

Citi has been negative on the sector for a while now, but its latest price saw a rise for lithium carbonate prices next year before a retracing.

Citi upgraded its 2023 lithium carbonate forecast by 50% to $US60,000 per tonne, while expecting prices to retrace by 20% over the next year.

A price fall that large would throw up significant headwinds for ASX lithium shares – so investors naturally sold yesterday.

The real damage was done by the results of the Pilbara Metals auction – a result that was reinforced by weak economic data from China yesterday, especially a fall in retail sales and a slide in the growth rate for industrial production.

Pilbara ran the 12th monthly spodumene auction on the BMX this week and the drop, while small, was noticeable being the first weakening for several months.

Pilbara said it sold two cargoes for a combined total of 10,000 dry metric tonne (dmt) at an average price of US$7,552/dmt (SC5.5, FOB Port Hedland basis).

The equivalent SC6.0 price negotiated equates to a price inclusive of freight, CIF to China of US$8,299/dmt, with deliveries expected from late January 2023.

That compares to the 5,000 tonnes sold in the November auction at US$7,805/dmt (SC5.5, FOB Port Hedland basis) which on a pro rata basis for lithia content and inclusive of freight costs equates to a price of ~US$8,575/dmt (SC6.0, CIF China basis).

Both prices in the December auction were down 3.2% from November which was a good result given confusion in china over sales of NEVs early next year with some key subsidies set to expire on December 31 and the renewed wave of Covid infections swamping more of the country.

Pilbara’s auction results are why its shares lost 11.4% yesterday and led the sector lower.

Allkem shares fell 4.8%, IGO shares were down 4.2%, Mineral Resources dropped 4.6%, Liontown lost 7.8% and Core Lithium fell more than 9%.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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