- Lithium producer Orocobre (ORE) has reported some major production setbacks in Argentina from COVID-19
- Production at the major Olaroz Lithium Facility stopped completely for 21 days as government lockdowns came on top of planned maintenance
- As such, lithium production was down 11 per cent compared to the same time last year, and sales revenue a hefty 64 per cent
- The company said global demand has started to pick back up, but it’s too early to determine how soon production will recover
- A late-trade recovery saw Orocobre shares close 0.97 per cent green today at $2.08 each
Dual-listed lithium producer Orocobre (ORE) is the latest company to reveal some major production setbacks brought about by COVID-19.
In today’s quarterly report, Orocobre said production from the Olaroz Lithium Facility over the March 2020 quarter was down 11 per cent on the same quarter last year.
The Argentinian plant had to be shut down due to local government quarantine restrictions which came on top of some planned maintenance. As such, Orocobre and its partners lost 21 days of production at the major project.
Orocobre owns 66.5 per cent of Olaroz, with the remaining interest split 25 per cent to Toyota Tsusho Corporation and 8.5 per cent to Jemse, an Argentinian Government investment arm.
Orocobre told shareholders this morning production at the project has recommenced but with strict biosecurity measures in place and a minimum crew.
Going hand-in-hand with the decreased production was a heavy 29 per cent decline in sales compared to the March 2019 quarter.
Orocobre sold 2518 tonnes of lithium carbonate over the March 2020 quarter. Over the December quarter, the company sold 3287 tonnes. Over the March 2019 quarter, this figure was 3530 tonnes.
In light of this, revenue was down 32 per cent on the December quarter to US$12.1 million (A$19.11 million). Over March 2019, Orocobre made US$33.4 million from sales — meaning March 2020’s result is 64 per cent lower than the same time last year.
The slowed Chinese demand from COVID-19 played a major part in the reduced sales as the supply chain, according to Orocobre, “ground to a standstill”.
Further, when the virus crossed Chinese borders and became a pandemic, car manufacturers in the US and Europe shut down operations or switched to producing medical devices.
Given the electric vehicle market drives the strong demand for lithium, this further deepened the drop in demand for Orocobre’s product.
The road to recovery
Orocobre is remaining realistic in its outlook of the future, being careful not to get investors’ hopes up too early.
“Orocobre has withdrawn full-year production guidance for FY20 due to current restrictions with production in Argentina and the high likelihood of ongoing disruption of future demand in global markets,” the company said.
Further, while the company said the Chinese market has progressively restarted operations, customers have been slow to return to car dealerships. As such, the company is forced to take a “wait and see” approach for future increases in demand.
Nevertheless, despite the somewhat-bleak quarterly report, shareholders seem happy to take the wait and see approach alongside Orocobre.
A late-trade recovery saw Orocobre shares close 0.97 per cent green today at $2.08 each. The company has a $526 million market cap.