Australia Metals & Mining: Lithium sector returning to growth as price outlook softens; Preview Sep-Q; Buy IGO, Sell PLS

We incorporate our recent global team lithium supply/demand update, with the global market to move from 16% deficit in most of 2026, to nearly balanced in 4Q26, and 8-18% surplus in 2027-2028E, driven by stagnant apparent demand growth as the underlying growth rate in EV and ESS softens with restocking tapering. On supply we see 32% growth in 2027E and 19% in 2028E, driven by projects in China, Africa and Australia. Our revised benchmark China spot lithium carbonate price is US$13.7k/t-LCE for 2027E, falling to US$11.0k/t-LCE for 2028E (80%-ile of the global cost curve). On spodumene prices are -5% to +4% over CY26-30E, including a modest increase in our LT price to US$1,300/t SC6. Australian spodumene supply remains set to add >1Mtpa SC6 (>125kt LCE) into CY27, with the AISC curve widening and flattening, though a return to growth spending in FY27E lifts all-in costs/FCF breakevens well above the AISC curve, keeping producers FCF negative. Into Sep-Q we focus on the ramp up at LTR, re