- ASX-listed lithium mining companies are finally taking a breather from the deep plunge witnessed due to the impact of COVID-19 outbreak and the lithium supply glut.
- The market sentiments around lithium miners are currently improving due to the emergence of cool metric technology, aimed at reducing the heating issue of lithium-ion batteries.
- Furthermore, global economies are implementing various measures, to promote the NEV growth in order to fast track their response to climate change.
- Amidst such market developments, Orocobre Limited (ASX:ORE) has downgraded its sales and price figures for the June 2020 quarter, citing the impact of COVID-19 outbreak on demand.
- The Company now anticipates the sales volume for the June 2020 quarter to stand ~ 1,600 tonnes while prices of lithium carbonate to stand ~ USD 4,015 per tonne.
ASX-listed lithium stocks are witnessing respite post a deep correction with the emergence of cool metric technology, which could address the heating problem of lithium-ion batteries. Furthermore, global economies are implementing various measures such as subsidised sales of EV, fund support for battery-tech, to promote the New Energy Vehicle (NEV) growth in order to fast track their response to climate change.
However, while lithium usage projection is rosy, the lithium market is currently dealing with the problem of lower demand from China amid slower economic growth due to the COVID-19 outbreak. Apart from that, the lithium industry has one-long standing problem of the supply glut, which most large lithium miners are now dealing with and curtailing production.
To Know More, Do Read: Lithium Charter, Domestic Miners, And Global Stance- KDR, MIN, A40, GXY, And PLS
In response to the weak demand from China in the status quo, the ASX-listed lithium miner- Orocobre Limited (ASX:ORE) has downgraded its sales volume projection for the June 2020 quarter.
The Company now anticipates the sales volume for the June 2020 quarter to stand ~ 1,600 tonnes of lithium carbonate, down by 52.76 per cent against the previous corresponding period, and the product price to be ~ USD 4,015 per tonne on a free on board (or FOB) basis, after completing a review of planned sales for the June quarter.
ORE further suggested that the COVID-19 outbreak has restricted the ability of the Company and its customers to complete transactions during the quarter. Furthermore, ORE mentioned that, most logistical issues have now been addressed, but the delivery of the product is yet to return to normal due to deferment from customers in the wake of lower production and inventory surplus.
Apart from that, post a phased restart of battery and EV production, manufacturers are being cautious over ramping the production amid economic uncertainty and lack of visibility on consumer purchases of EV and portable electronics.
However, while the COVID-19 outbreak has added pressure to the well-stocked supply chain in the near-term, the same has prompted many nations to deliver accelerated investment, which in turn, could provide benefits over the medium- to long-term.
For example, the European Union has demonstrated clear intentions for utilising EV investment as a supporting pillar to stimulate the economy, while Germany has increased its incentives by two-fold on EV purchase, which has now reached to EUR 9,000.
Furthermore, the United Kingdom and France are implementing various programs to support the manufacturing and use of EV as well as hybrid vehicles.
While many nations are backing EVs, the largest EV manufacturing hub- China is not lagging behind, and the red dragon is also subsiding the EV purchase, delivering a modest improvement in EV sales on the Provincial level.
ORE projects the EV sales in China to increase during the year with better availability of highly sought-after international brands. The company also believes that with the reduction in battery cost is likely to be passed on to consumers through lower EV prices.
However, despite the healthy projected recovery in EV sales, inventory levels are not anticipated to demonstrate much improvement or price movement over the short-run; thus, the miner has decided to fast track its maintenance schedule from August to late July.
The internal maintenance planned by the Company to minimise cost would cease operations for up to three weeks with expenditure anticipation of USD 1 million.
Furthermore, ORE suggested that it is actively managing the inventory to tune the production with expected shipment volumes.
Recently, the Company had acquired Advantage Lithium Corp under the Business Corporations Act for 0.142 shares of Orocobre for a share of Advantage. Apart from that, the Company had recently declared to return $600 million to its shareholders by 30 June 2020, including the capital return of $150 million depending on shareholders’ approval and a special dividend of $450 million.
March Quarter Recap
ORE generated a revenue of $12.1 million during the March 2020 quarter, which remained 32 per cent down against the previous quarter and down by 64 per cent against pcp.
The production plunged by 24 per cent against the previous quarter to stand at 2,732 tonnes while the sales volumes took a hit of 23 per cent to stand at 2,518 tonnes.
The average realised price on sales remained 11 per cent down against the previous quarter to stand at USD 4,810 per tonne.
This is not unprecedented that the Company is dealing and managing business amidst challenging conditions, the same has been a story since the beginning of the year and the Company is currently focusing on cost-cutting and bringing production and shipment in line with the demand from consumers.
To Know More, Do Read: Orocobre Managing Industry Challenges; Actions and Developments in Q2 FY20
In a nutshell, ORE anticipates the sales volume for the June 2020 quarter and average realised price on sales to tumble considerably, and considering the lower demand anticipation over the short-term, the miner has decided to fast track its maintenance schedule from August to late June.
Furthermore, ORE plans to trim the production to match it with the offtake or demand to reduce the cost and sail through the stormy market.
On 26 June 2020, ORE closed at $2.370, down by 5.578 per cent against its previous close on ASX.