The new year has started with all eyes turned to key renewable commodities led by lithium.
The outlook could be problematic for a while with confusion from China about sales of NEVs (New Energy Vehicles, as China describes battery and hybrid vehicles) and the impact on sales of the ending of key purchase subsidies.
Price confidence and momentum in share price of the lithium stocks on the ASX will be tied to the battering (and hopefully recovery) in the fortunes of Tesla and the reputation of CEO Elon Musk (see separate story).
But a few points at the start of the year – Pilbara Minerals will reveal its capital management plans by the end of February – either in the quarterly at the end of this month or the June half year results a month later.
The latest Pilbara Minerals Battery Materials Exchange auction in the next week will be key after the December auction showed a small fall, the first for a couple of months.
On December 21, Pilbara announced new price deals for customers starting from December. That could go some way to offsetting any nervousness about price weakness in China in the early months of this year.
The dividend and other capital management ideas should be seen as a positive and the company’s generosity to shareholders will be a good guide to its view about demand for lithium over the rest of calendar 2023.
Weak sales data in China each month for New Energy Vehicles though will rattle the share prices of key renewables companies like Allkem, Pilbara Minerals, Liontown, Core Lithium, BHP and Rio Tinto (which will be offset by the current rebound in iron ore prices).
Because of the lags in pricing pass through, any falls in lithium prices won’t show up until the June or September quarters – if it happens.
Quarterly reports and commentary from the likes of Albemarle of the US and Chile’s SQM should be watched closely as well because of their size and major positions in the EV supply chain.
Benchmark Mineral Intelligence said lithium carbonate prices fell 6% in December in renminbi terms as local users worried about the impact of the ending of most purchase subsidies for NEVs.
That weakness saw the prices of ASX lithium stocks hit last month as nervous investors took profits.
Likewise BHP and OZ Minerals will formalise their marriage in the next couple of months after signing a definite agreement in the break.
BHP’s $A9.6 billion purchase will be done via a scheme of arrangement expected to be implemented in the middle to late April 2023.
At some stage after that BHP will reveal plans for OZ’s expansion into the West Musgrave copper and nickel project in eastern WA, a possible third copper mine in South Australia and the future of its just opened Brazilian copper gold mine.
The West Musgrave decision will give us an insight into BHP’s nickel plans which have already seen hundreds of millions of dollars invested in its existing operations in WA, the nickel refinery and smelter in Kwinana and off-take deals with the likes of Mincor.
Newcrest reports its December quarter and half year figures around January 25 but investors will also be looking for news on a new CEO to replace Sandeep Bishwar who has led the company for the past nine years. His impending departure was announced over the break.
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And that brings us to Chalice Mining, which has several important statements ahead in 2023 – a scoping study for the Gonneville deposit at Julimar, north of Perth, a new reserves figure for Gonneville and at least two other deposits, a decision on the mining and processing systems, and a partner for that side of the business.
Don’t be surprised if by the end of 2023, there are two Julimar companies – one an explorer, like it is now, the second a mining and processing company controlled by the explorer but with a heavyweight partner or partners.
The outlook for metals like copper, nickel, gold, lead, zinc etc hasn’t changed since late 2023. The value of the US dollar, US interest rate decision from the Federal Reserve and the health of the US and Chinese economies (and linked demand) will be the major drivers of price and demand in renewable metals.
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Finally, energy markets ended 2022 under pressure and started the new year in similar fashion with the warm winter in Europe undermining gas prices and concerns about recession and weak demand hitting oil prices.
Brent and US West Texas Intermediate crude futures ended Friday with losses of more than 8% for the first week of 2023.
US natural gas prices slumped more than 15% as the warm winter in Europe cut demand. Warmer conditions across parts of the US (after the previous week’s big Winter blast) also helped send gas prices lower.
