Allkem share price stumbles amid falling quarterly lithium prices

Allkem noted that lithium demand over the quarter was softer than expected.

| More on:
a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Allkem Ltd (ASX: AKE) share price is taking a tumble today.

Shares in the S&P/ASX 200 Index (ASX: XJO) lithium stock closed yesterday trading for $10.56. In Thursday morning trade, shares are swapping hands for $10.22, down 3.3%.

For some context, the ASX 200 is down 0.8% at this same time.

Here's what investors are mulling over.

ASX 200 lithium miner ramps up quarterly production

The Allkem share price is retreating today following the release of the company's quarterly update for the three months to 30 September.

Among the highlights, Allkem's Olaroz Lithium Facility produced 4,453 tonnes of lithium carbonate, up 35% from the previous corresponding period.

With record lithium carbonate sales of 4,554 tonnes over the three months, Olaroz generated revenue of some US$118 million at an average realised price of US$25,981/tonne FOB. The gross cash margin came in at 77%, or US$19,893/tonne.

And quarterly production of 72,549 tonnes of spodumene concentrate at 5.3% Li2O grade at Mt Cattlin represented a record quarterly result. Production was up 25% in the quarter and in line with management's full-year guidance.

The ASX 200 lithium miner is also reported on progress across a range of development projects.

All up, Allkem reported quarterly revenue of US$327 million, down from US$334 million last quarter. The quarterly gross operating cash margin was approximately US$237 million.

As At 30 September, the miner had net cash holdings of US$672 million, up US$23 million from 30 June.

So, why is the Allkem share price slipping?

I suspect the pressure on the Allkem share price may have to do with the significantly lower prices Allkem received for its lithium products over the quarter. As well as the shorter-term outlook for lithium demand.

The miner noted:

Demand during the quarter was somewhat softer than expected. Procurement activity has been conservative as customers have kept a wait-and-see approach, putting renewed downward pressure on lithium prices.

But management appears confident that this a shorter-term issue.

"Medium to longer term demand drivers remain resilient despite short term sentiment and volatility," the miner stated.

Allkem share price snapshot

With today's retrace factored in, the Allkem share price is down 8% in 2023.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

A happy construction worker or miner holds a fistful of Australian dollar notes.
Materials Shares

$5,000 invested in BHP shares 5 years ago is now worth…

Will its shareholders be happy with their investment? Let's find out.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Materials Shares

Guess which ASX 200 stock is ending the week with a bang thanks to Rio Tinto

This stock has won a major contract from the mining giant.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Materials Shares

Is it time to buy ASX lithium shares?

Lithium prices continue to sink. Has this created a buying opportunity?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Materials Shares

Mineral Resources shares sink on Onslow Iron blow

This miner is having a tough session. Let's find out why.

Read more »

A man sits in a chair hunched over a laptop and covered head to toe in frozen icicles to represent Envirosuite's trading halt
Materials Shares

MAC Copper shares in trading halt as miner flags 'potential control transaction'

MAC Copper shares are frozen while Sandfire Resources shares are the fastest risers of the ASX 200 today.

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Materials Shares

Bell Potter says this ASX lithium stock could rise ~50%

The broker has just put a buy rating on this lithium stock.

Read more »

A woman stands next to a large green battery smiling and eating an apple with a lifting green arrow line in the background, indicating rising stock prices.
Share Market News

Are Liontown Resources shares a buy, hold or sell according to Macquarie?

Here’s what the broker has to say about this Lithium miner. 

Read more »

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Materials Shares

Rio Tinto share price tumbles on CEO bombshell news

The mining giant is now looking for a new leader.

Read more »