By: Ecofin agency

In an interview with Ecofin Agency, Adam Megginson of Benchmark Mineral Intelligence detailed the complex mechanisms of lithium pricing and the challenges faced by emerging African producers.

Megginson explained that Benchmark operates as a price reporting agency (PRA) with a core mission to bring transparency to an otherwise opaque market. Unlike commodities with publicly known prices, lithium transactions are difficult to track. Benchmark specializes in battery raw materials and establishes its price assessments by collecting verified transaction data from buyers, sellers, and traders, which it then compiles into daily and weekly reports. This provides a crucial market overview for all participants.

He noted that the lithium market remains dominated by China, which dictates most pricing conventions. Consequently, transactions in less liquid markets, like Africa, are often priced as a discount to a benchmark from a more established market, such as the Australian spodumene index. While Benchmark has studied creating a specific African index, Megginson stated that there are not yet enough regular transactions to support one, though he believes it is only a matter of time.

Addressing the specific situation in Mali, where export permits have been suspended over pricing disputes, Megginson highlighted the significant challenge of transfer pricing. He pointed out that when a project is majority-owned by a single entity—such as Kodal Minerals selling to its majority partner, Hainan Mining—the declared price can be artificially lowered for financial advantage, obscuring the true market value. In these cases, he advised governments to use independent price indices to recalculate royalties and ensure fair revenue.

A major theme of the discussion was that a significant portion of African lithium sales, particularly those led by Chinese firms, currently rely on transfer pricing rather than market-based indices. This practice makes it difficult to track the mineral's true value and often disadvantages host nations. Buyers may also justify lower prices for African material by citing variable quality or higher processing costs compared to standardized concentrates from Australia.

Megginson identified two decisive factors for African producers to gain influence: infrastructure and access to capital. Reliable railways, ports, and electricity grids are essential for competitive and consistent production. However, the most critical lever is local processing. He argued that as long as Africa exports raw ore or low-grade concentrate, it remains a "price taker." By developing local refining capacity to produce standardized spodumene concentrate or even battery-grade chemicals, African nations could diversify their buyers, reduce dependence on China, and ultimately increase their weight in global lithium price formation.