Lower prices, oversupply to weigh on lithium miners By Reuters

© Reuters. Brine swimming pools at Albemarle lithium mine are pictured on the Atacama salt flat, in Antofagasta area, Chile, Could 4, 2023. REUTERS/Ivan Alvarado

By Arunima Kumar

(Reuters) – Albemarle (NYSE:) Corp, the world’s largest producer of lithium, is anticipated to report decrease quarterly revenue as costs of the silvery-white steel got here beneath stress as a result of considerations of falling near-term demand and oversupply.

Lithium miners have had a troublesome yr as weak electrical automobile (EV) gross sales progress led to excessive stockpiles and despatched costs of the steel tumbling down. Lithium is a key steel utilized in EV batteries.

“Because the lithium market balances shift to adequately provided in 2023 and oversupplied in 2024/2025, we count on to see a interval of earnings and margin stress throughout the worth chain,” BofA analysts stated.

Lithium costs in China, the steel’s high shopper, sank throughout the quarter, hit by lackluster shopping for.

The Chinese language spot battery grade lithium carbonate costs, fell round 45% to 165,000 Chinese language Yuan ($22,561.63) per tonne throughout the July-September quarter.

With the Chinese language lithium carbonate benchmark down 72% from its all-time excessive in November 2022, shares of Livent (NYSE:) and different lithium pure-plays have come beneath substantial stress, Raymond James analyst Pavel Molchanov stated.

Overcapacity within the power storage sector, the second-biggest shopper of lithium, eroded margins and has additionally weighed on the costs.

“We count on a 15%-20% destock downstream to be vital this fall and winter to clear the stock overhang, until the trade sees a pointy snap-back in demand earlier than the Chinese language New Yr,” stated Jefferies analyst, Laurence Alexander.

Analysts additionally flagged extra provides from new tasks coming on-line to additional weigh on lithium costs.

“Given the decrease trajectory of our earnings and demand estimates, it might come as no shock to us if each ALB and LTHM start to rethink their capex plans, particularly past 2026/2027 as provide for lithium lengthens,” stated Piper Sandler analysts Charles Neivert and Kyle Winborne.

Albemarle is anticipated to report quarterly outcomes on Wednesday, whereas smaller rival Livent is scheduled for Tuesday.

Firm LSEG Q3 EPS estimate LSEG Q3 income estimate

Albemarle $3.99 $2.51 billion

Livent $0.46 $268.29 million

($1 = 7.3133 renminbi)