Arcadium Lithium (ASX: LTM) shares are outperforming the market by some distance on Wednesday.
At the time of writing, the ASX lithium share is up 8% to $4.34.
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Why is this ASX lithium share surging?
Investors have been buying the lithium miner's shares today in response to its second quarter update.
Here's a summary of its performance during the three months ended 30 June:
- Revenue down 55% to US$255 million
- Adjusted EBITDA down 69.9% to US$99.1 million
- Adjusted earnings per share down 74% to 5 US cents
While the above may look terrible on paper, Arcadium Lithium's revenue was actually ahead of expectations and its earnings matched consensus estimates. This explains why the ASX lithium share is outperforming today.
What happened during the quarter?
During the three months, Arcadium Lithium delivered a slight quarter on quarter increase in sales volumes. This reflects higher lithium carbonate and hydroxide sales, partially offset by lower spodumene sales due to reduced production at Mt. Cattlin.
However, with the company averaging a realised price of US$17,200 per tonne for combined lithium hydroxide and carbonate, the ASX lithium share's revenue more than halved compared to the prior corresponding period.
Management advised that the lower realised price was driven by a combination of lower market prices for lithium chemicals, the lag impact of price indices on a portion of the company's carbonate and hydroxide volumes, and changes in both product and customer mix.
Supply growth update
Also potentially giving the ASX lithium share a boost today is news that it is hitting pause on some of its lithium production expansion plans. This is in response to an oversupply in the industry.
Arcadium Lithium's CEO, Paul Graves, commented:
Despite where lithium market prices are today, we still see a strong long-term growth trajectory for lithium demand and expect a return to healthier market fundamentals over time. However, the market is clearly indicating that the industry does not need to add supply at the same pace as previously expected.
We have therefore decided to defer investment in two of our four current expansion projects. While we remain fully committed to developing our highly attractive portfolio of expansion opportunities, each of which is expected to be amongst the lowest cost lithium operations globally when completed, we will seek to do so on a timeline that is supported by both the market and our customers.
Outlook
Despite the above, Arcadium Lithium is still forecasting strong sales volume growth this year and next.
It is forecasting a 25% increase in combined lithium hydroxide and lithium carbonate sales volumes for FY 2024. It then expects a further 25% increase in 2025 compared to 2024, both driven by already-completed expansions.
