The Pilbara Minerals Ltd (ASX: PLS) share price is up 4% after the ASX lithium share extended and expanded a lithium agreement.
Extended agreement
Pilbara Minerals said it has signed an agreement with Chengxin Lithium Group which materially extends and expands the supply of spodumene concentrate (raw lithium) to a leading lithium chemical converter.
Chengxin is a global integrated lithium chemicals producer with a growing international customer base for lithium battery materials supply. Some of its customers include BYD and Hyundai. This business has operations across China, Indonesia, Argentina and Zimbabwe.
Under an existing short-term agreement with Chengxin, signed in 2023, was for 70,000 tonnes of spodumene concentrate in FY24.
The amended agreement is for a significant extension and expansion of the offtake agreement until the end of 2026.
New agreement
In 2024, Pilbara Minerals will supply an additional 60kt of spodumene concentrate taking the total supply in the 2024 calendar year to 85kt.
Pilbara Minerals will then supply 150kt of spodumene concentrate in each of 2025 and 2026.
Consistent with the existing pricing in the agreement, all spodumene concentrate volumes will be sold based on the market price at the time.
Pilbara Minerals said this increased supply is separate to its strategic partnership process which “continues to be progressed in parallel and remains on track to conclude in the March 2024 quarter.”
Management commentary
The Pilbara Minerals director and CEO Dale Henderson said:
This amendment highlights the demand for Pilbara Minerals’ product and is a continuation of our strategy to expand our partnership with leading global lithium producers in the medium term while we progress the development of our long-term downstream partnership strategy.
Both Pilbara Minerals and Chengxin are committed to the energy transition and are focused on extending our respective positions as high quality, low-cost producers in the growing lithium battery materials market.
Final thoughts on the Pilbara Minerals share price
The lithium price has utterly sunk over the last 15 months. If the lithium price were to recover in the medium-term, this could prove to be an opportunistic time to look at the ASX lithium share. But, the relationship between supply and demand can’t be ignored. Will demand outstrip supply? It’s hard to say this stage.
There are plenty of other ASX shares I’d rather buy instead where the future is clearer.
