The deal was done at $7,017/mt based on an SC6 equivalent, CIF China basis, freight on board. Delivery was due in late July, Pilbara said.

The transaction was finalized before a spodumene concentrate auction scheduled for June 23. The company said it would plan to hold another auction during the second week of July.

The cargo was offered to a limited number of registered Battery Material Exchange (BME) participants in advance of the proposed auction on June 23, the announcement says. BMX stands for Pilbara Minerals' digital sales platform.

The sale price was above the market's expectations of around $6,000/mt, sources said, when China's demand is still recovering after the COVID-19 lockdowns.

“The sale price would imply an LCOS (Li carbonate operating cost) around Yuan 455,000/mt for lithium carbonate (including 13% VAT and Yuan 30,000/mt processing costs),” said a Chinese lithium converter. “It would drive salt prices this way going forward, and I think some sellers may contemplate adjusting offer levels significantly next week.”

“This price level is too high and unsustainable,” a producer said. “Because I’m not sure how the converters and battery makers are going to make profits.”

Platts had assessed battery-grade lithium carbonate at Yuan 470,000/mt on June 22 and battery-grade lithium hydroxide at Yuan 462,000/mt, both on a delivered, duty-paid China basis, the data by S&P Global Commodity Insights showed.

Prices in China went largely unchanged between June and May as the battery industry was recovering from a two-month COVID-related lockdown in Shanghai that brought industrial activity to a halt.

Higher upstream prices are likely to weigh on China's demand recovery, a Chinese precursor company said. Some cathode makers also had not resumed normal run rates after the lifting of the lockdowns, he added.

This last would be a fresh blow to the nickel-cobalt-manganese segment, which has faced persistently high prices for nickel and cobalt feedstock. To make high-nickel NCM batteries, you need to use high-grade lithium hydroxide, which is produced from spodumene.

The news of the deal also has implications for term contract prices for the third quarter of 2022, which are now being negotiated, a Chinese trader said.

“It would be very hard to say what prices would be for Q3,” the trader added.

But tight supply of spodumene would likely continue to weigh on the market in the balance of 2022, industry sources said, suggesting prices could climb even higher. However, there was likely to be significant downstream resistance that would cap upside for spodumene prices going forward.