Demand for lithium chemicals and spodumene concentrate increased materially during the quarter in all key geographies responding to sustained high production of lithium-ion battery materials and batteries.

Electric Vehicle (EV) sales of ~3.7 million units between January and August 2021 are up 150% compared to prior year which has meant global average lithium chemical and spodumene concentrate prices continued rising during the quarter. EV sales in China alone recorded ~1.7 million units year to date which is up 190% compared to prior year. A new sales record of >300,000 EV units was achieved in August.

Demand for lithium carbonate in China outstripped supply in the spot market during the September quarter due to a strong preference for LFP battery formats in the domestic market. Such market dynamics pushed spot lithium carbonate prices to ~US$23,000/tonne CIF at the end of September, from ~US$11,500/tonne CIF at the beginning of the quarter and are once again trading at parity with lithium hydroxide prices.

Prices for lithium chemicals outside China also rallied as contracted prices are gradually adjusted up to reflect tightening market conditions across the supply chain.

Consistent with the high demand trend for lithium chemicals and pricing, spodumene concentrate spot sales during the September quarter exceeded US$1,000/tonne CIF compared to ~US$650/tonne CIF in the preceding quarter. Spot prices for the limited volumes of spodumene available in the December quarter are estimated to be in the range of US$1,500/tonne CIF to US$2,500/tonne for SC6% CIF.

Lithium chemicals and spodumene concentrate are largely sold under long term contracts with a mixture of yearly negotiated prices and formula adjustments based off price indices. Reported spot prices only reflect marginal volumes rather than prices in the high-volume contract market. As such, spot prices may be considered leading indicators for the trend of future contract prices.

Estimated lithium chemical production in China during the September quarter remained consistent with the prior quarter at ~60,000 tonnes of lithium carbonate and ~45,000 tonnes of lithium hydroxide.

Whilst China's power restrictions did not have a significant effect on lithium chemical supply during the September quarter, it affected production volumes of battery materials in certain Provinces. If these conditions were to persist during the December quarter, domestic production rates for the lithium-ion battery supply chain may be reduced.

The supply from lithium brine and spodumene producers is estimated to be at least 3% less than the projected demand volumes in 2021. This supply deficit is forecast to increase to over 20% over the next five-year period according to Benchmark Minerals.

Concerns for securing upstream supply from lithium resources across the battery supply chain has resulted in further consolidation with recent upstream acquisitions at higher multiples during the September quarter. It's anticipated that lithium-ion battery producers and EV manufacturers will continue to play a more active role in sourcing lithium chemicals and spodumene concentrate in coming years under long term purchase agreements.