(Yicai Global) June 20 -- A unit of Australia's Mineral Resources has terminated its outsourcing contract with Ganfeng Lithium Group, a Chinese metal processing company, early to increase its margins as lithium carbonate prices are falling, according to an insider.

Process Minerals International will start directly selling raw spodumene to Ganfeng, which results in higher margins than the earlier model of outsourcing processing so that the Australian company could sell lithium compounds, the Paper reported yesterday, citing a person familiar with the matter.

The early contract termination will mean that Ganfeng will lose some processing fees, the source pointed out. But it also means that it can choose its products and prices more flexibly, the person added.

Jiangxi province-based Ganfeng said on June 16 that the firm and PMI agreed to terminate their contract ahead of time based on the current market situation. This means that PMI will sell spodumene coming from Western Australia's Mount Marion to the Chinese company at market prices, it added. The agreement, inked in February 2022, was supposed to be valid till December with a chance of renewal.

Lithium carbonate prices have slumped this year as China's new energy vehicle market is slowing growth. Prices of the NEV battery material are almost 50 percent lower than the record high of CNY600,000 (USD83,621) per ton recorded last November.

Generally, lithium compounds fluctuate in price more than raw minerals, the insider pointed out. Therefore, raw material prices tend to fall slower in a market downturn.

Ganfeng and PMI each hold 50 percent stakes in Reed Industrial Minerals, the miner of Mount Marion. Ganfeng enjoys the right to sell 49 percent of the mine's total output while PMI takes care of the rest. Exploration at the mine is expanding while the annual capacity should reach 900,000 tons of fine spodumene, Ganfeng disclosed recently.

Editor: Emmi Laine