Piedmont Lithium (PLL) recently completed a 27% workforce reduction in a bid to cut costs. The company has been hit by the sharp decline in lithium prices. Lithium is used in batteries for things like electric vehicles and smartphones. Piedmont Lithium CEO Keith Phillips is bullish however, telling Yahoo Finance Live that when it comes to mining "low prices are the cure for low prices." Philips explains that with production slowing down due to the lower price, there's going to be "another supply crunch," adding that "it's a matter of time" that prices will will rebound.
Phillips notes that customers currently have record low inventories and, as a result, he is hoping for a "pretty rapid bounce back" in the market. On concerns about demand for electric vehicles batteries, Phillips shrugged them off, arguing "the demise of the EV industry is greatly exaggerated."
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Editor's note: This article was written by Stephanie Mikulich
Video Transcript
- Once dubbed the next gold rush and prices soared. But post-pandemic lithium mining has had a hard run. The mineral which is used in most EV batteries as well as smartphones was priced at nearly $90 a ton in 2022 and now comes in at just over $13. But is it pain now priced in? Piedmont Lithium managed to be profitable in Q3 despite the headwinds and will be reporting earnings this month. Its CEO Keith Phillips joins us now along with our senior reporter Ines Ferre.
Keith, thank you so much. As we just alluded to, the pricing here has been very volatile. In order to compensate for that, your company has had to go through some restructuring committing to a $10-million cost cutting plan that was 27% of your workforce. How do you think that restructuring plan will really insulate your business from some of these downward pricing pressures that we're seeing?
KEITH PHILLIPS: Well, first of all, thanks for having me. It's great to be back with you guys again. Yeah, the restructuring was difficult. We had to do something similar a few years back when we were a smaller company, great people. The people departing are all terrific and we wish them the best. But we're really just want to make sure we get our cash outflow and our cost position in check for the current market.
So I've been in this business seven years. I joined in a bear market, I suffered through the bear market in 2020, 2021. Went through a really strong bear market over the last couple of years and now we're in another bear market. It's a cyclical business we're going to have our ups and Downs the whole industry will I think the good news is in the mining speak, low prices are the cure for low prices. So with the prices being down now, 90% from the peak 15, 16 months ago, just about every new development project is slowing down or being just pushed to the right by a year or more.
And it just means we're going to have another supply crunch. It's a matter of time in my view. And prices will rebound, I think, and go to very high levels. So we need to be sure we're ready for that and prepared for that, and that's why we went through what we did.
INES FERRE: Keith, so what do you see happening in the meantime because there is supply that's expected to grow this year? For how long-- I mean, how long do you think that it will take for the market to absorb all this?
KEITH PHILLIPS: I don't think it'll take long. I mean, I think the customers are at record lows in their inventory levels. And I think Chinese New Year is ending as we speak and we're hoping for a pretty rapid bounce back. I'm not we're not budgeting for that, but it could happen. I think, demand grew very dramatically last year and lithium demand was up over 25%. EV demand in January this year was up 69% globally from last January. Very significant change.
So I think the demise of the EV industry is greatly exaggerated. Overall, last year I think demand was up 35% for EVs. So the business is still growing strongly. There are projects that are coming online this year. There aren't that many really in the overall scheme of things. More importantly as you look out to 2025 and 6 and 7, we know all the project the pipeline very, very, very well very little that is going to get developed or funded in this environment.
Even if you have a project ready to develop which not many people do, you're going to slow it down because financing is more expensive, debts more expensive, equity is a lot more expensive for companies like Piedmont. So you're just going to be more patient and you're going to wait for a stronger environment. And that's what's going to happen. We've seen Albemarle announce deferrals of their project in South Carolina.
Our projects in the US are clearly going to move more slowly. These are $1 billion projects. They're really important strategically for us and for the country, but now's not the right time to fund them. So those delays just mean there will be a lot less supply for the car companies and battery companies who so desperately need it. So I think the recovery as a matter of time. The strong companies will get through this and be ready.
And I really think we went from euphoria two years ago to despair today. Someone described it today as peak pessimism. I think we'll be in a euphoric mindset again at some point not too far in the future.
INES FERRE: And how do you see this shaking out with the projects? As you mentioned, these projects that are slowing down, do you see consolidation with some of these projects, with some of these companies that have announced plans?
KEITH PHILLIPS: Yeah. There's, I guess, three kinds of companies in the industry. There are the established handful of companies. It's literally that's all there are in Albemarle live. Arkadium, there now are a couple others-- couple of the Chinese. They're established. They have project pipelines. Some of their projects will advance others will be deferred, I'm sure. There are companies like us that are early stage producers.
So we have the only producing sponsoring mining in North America. It's called North American Lithium with a partner cyanea mining out of Australia. Great project. Again, the only producing spodumene mine in North America. It's the biggest lithium operation in all of North America, it's operating. So that's great. So we want to operate that through the cycle and be ready for when the market rebounds because we're pretty sure it will.
And then there are dozens and dozens, literally hundreds of earlier stage lithium companies who have some interesting projects-- others may be less interesting. All of those are going to move more slowly. It's going to be harder for them to raise the equity capital. Those companies are where we were five or six years ago where you don't have any revenue, you're really funding your operations or your development out of equity offerings, which are tougher when the stocks are down 50% or more.
So I think it'll all move more slowly. And I think it's just-- this is an industry that's probably in the third inning of its development. I mean, the industry is probably quadrupled in the seven years I've been in the business. It's going to quadruple again from here over the next 7 to 10 years. And at some point, it will be a mature. I think that's really in the 2040s. For the time being, I think we're unfortunately going to go through these volatile times.
The good news is, if you just look at the stock price graphs and the lithium price graphs down 90%, it's a pretty interesting time to take a position, I think, and build for the longer term.
- Keith Phillips, appreciate your insight. And as always, thanks to Ines Ferre.
