Australia-listed IGO Limited announced on Monday that Talison Lithium, the entity that operates the world’s largest lithium mine, Greenbushes, has agreed to adopt a new pricing mechanism for spodumene concentrate with 6% lithium oxide content (SC6.0).

The Greenbushes Operation is operated by Talison Lithium – which is 51% owned by Tianqi Lithium Energy Australia (TLEA) and 49% by Albemarle – under the Windfield Joint Venture. TLEA is a joint venture of China’s Tianqi Lithium Corporation (51%) and IGO (49%), Kallanish notes.

In a statement, IGO says the board of Windfield Joint Venture agreed to amend the pricing mechanism which will be applied to SC6.0 spodumene concentrate offtake volumes effective 1 January 2024. The pricing will be reset monthly, taking an average price basket of the previous month less a 5% volume discount, fob Australia. The companies will use four price reporting agencies. The previous pricing mechanism was based on the average price of the previous quarter.

The move is likely to positive to market players, given pricing will be closer to lithium spot prices. Some believe the shift to monthly average as opposed to quarterly will have “significant meaning” for the wider industry.

“For Chinese lithium salt companies, in the current cycle, lowering costs is a big consideration. We’ve made plans based on different mechanisms and we expect the price changes of spodumene concentrate will be closer to the price changes of lithium salt products,” an unnamed lithium salt producer is quoted by The Paper, suggesting the growing voice power of Chinese downstream companies. 

In addition, IGO also said SC6.0 production at Greenbushes during the second half of fiscal 2024 is expected to be reduced due to “below forecast” indicated volumes. The plan is to effectively match inventory build with product logistics, it says.

IGO expects sales in H2 FY24 to be 20% lower than production as inventories build at site. It now estimates 1.3-1.4 tonnes/year of SC6.0 production at Greenbushes, down from the previous 1.4-1.5 t/y forecast. 

“Prices of spodumene have extended losses after collapsing by 80% last year. If the current price environment persists, other operations would certainly have to consider dialling back production,” adds Jarden Securities’ analyst, Jon Bishop.