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Why is the lithium price plunging? As Orocobre and Galaxy shares tumble again

Tom Richardson

Orocorbe Ltd (ASX: ORE) and Galaxy Resources Limited (ASX: GXY) shares tumbled yesterday as industry reports continue to suggest the lithium price has been on a steady downward trajectory. There’s no benchmark, spot or futures-based exchange traded price for lithium, unlike other commodities such as iron ore, gold, copper, or oil which adds to the volatility in lithium prices.

According to news reports in global mining industry journal Mining.com: “Despite the lofty expectations for demand from electric vehicles where lithium-ion batteries dominate, prices for the raw material have been in relentless decline for the last 18 months.”

The journal reports that certain lithium grade prices out of South America dropped 27% for the year to June, with certain lithium grade prices out of China and Australia posting even worse falls.

As there’s no benchmark price (due to their being different grades and constituents of lithium) with no exchange traded price (due to lack of regular volume) industry sources are reliant on miners self-reporting prices achieved to get a handle on spot prices.

Therefore investors in the likes of Pilbara Minerals Limited (ASX: PLS), Kidman Resources Ltd (ASX: KDR), Argosy Minerals Ltd (ASX: AGY) AVZ Minerals Ltd (ASX: AVZ), Galaxy and Orocobre should expect more volatility over the 12 months ahead. 

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019