January 29, 2020 / 11:44 PM / 22 days ago

Australia's Orocobre flags weak lithium market in first half of 2020

(Reuters) - Australia’s Orocobre Ltd (ORE.AX) on Thursday flagged a weaker lithium market for the first half of 2020 and said it had cut costs at its flagship Olaroz lithium project in Argentina to tackle waning demand in the market.

Lithium miners in Australia faced severe pressure last year as prices plummeted after a cut in electrical vehicle subsidies by China, the world’s biggest EV market, curbed demand for the metal.

Last month, Orocobre cut its lithium carbonate sales price for the December quarter to ensure retention of market share. The company also lowered operating costs by 16% over the prior quarter in a bid to deal with the challenging market conditions.

Prices of the battery material plummeted over 50% since 2018 and electric vehicle sales have slumped in China.

Earlier this month, Galaxy Resources (GXY.AX) said it would sharply scale back operations at its flagship Mt Cattlin mine in 2020, while Wesfarmers Ltd (WES.AX) deferred the investment decision for its Mt Holland lithium project by a year.

However, Australian lithium miners are expected to recover by mid-2020, helped by supply cuts and stronger demand from the electric vehicle sector as production ramps up.

Orocobre said it expects to see a weak market in the first half of calendar 2020, with improvements in the second half.

“Encouraging demand indicators and further supply curtailments emerged in late CY19/early CY20 and are expected to progressively improve market balance in CY20,” Orocobre said on Thursday.

The miner said it continued to expect production at the Olaroz facility in fiscal 2020 to be at least 5% higher than 2019.

The company churned out 3,586 tonnes of lithium carbonate at its flagship facility in the second quarter ended Dec. 31, against 3,782 tonnes a year earlier.

Reporting by Shreya Mariam Job and Shruti Sonal in Bengaluru; Editing by Maju Samuel

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