Allkem share price stumbles amid falling quarterly lithium prices

Allkem noted that lithium demand over the quarter was softer than expected.

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The Allkem Ltd (ASX: AKE) share price is taking a tumble today.

Shares in the S&P/ASX 200 Index (ASX: XJO) lithium stock closed yesterday trading for $10.56. In Thursday morning trade, shares are swapping hands for $10.22, down 3.3%.

For some context, the ASX 200 is down 0.8% at this same time.

Here's what investors are mulling over.

ASX 200 lithium miner ramps up quarterly production

The Allkem share price is retreating today following the release of the company's quarterly update for the three months to 30 September.

Among the highlights, Allkem's Olaroz Lithium Facility produced 4,453 tonnes of lithium carbonate, up 35% from the previous corresponding period.

With record lithium carbonate sales of 4,554 tonnes over the three months, Olaroz generated revenue of some US$118 million at an average realised price of US$25,981/tonne FOB. The gross cash margin came in at 77%, or US$19,893/tonne.

And quarterly production of 72,549 tonnes of spodumene concentrate at 5.3% Li2O grade at Mt Cattlin represented a record quarterly result. Production was up 25% in the quarter and in line with management's full-year guidance.

The ASX 200 lithium miner is also reported on progress across a range of development projects.

All up, Allkem reported quarterly revenue of US$327 million, down from US$334 million last quarter. The quarterly gross operating cash margin was approximately US$237 million.

As At 30 September, the miner had net cash holdings of US$672 million, up US$23 million from 30 June.

So, why is the Allkem share price slipping?

I suspect the pressure on the Allkem share price may have to do with the significantly lower prices Allkem received for its lithium products over the quarter. As well as the shorter-term outlook for lithium demand.

The miner noted:

Demand during the quarter was somewhat softer than expected. Procurement activity has been conservative as customers have kept a wait-and-see approach, putting renewed downward pressure on lithium prices.

But management appears confident that this a shorter-term issue.

"Medium to longer term demand drivers remain resilient despite short term sentiment and volatility," the miner stated.

Allkem share price snapshot

With today's retrace factored in, the Allkem share price is down 8% in 2023.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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