Often referred to as “white gold” and a crucial ingredient in rechargeable batteries, lithium is so lightweight that it can float on water. However, its market price has dropped significantly over the past year.
This price drop is attributed to a mix of declining global electric vehicle sales and an oversupply of lithium ore worldwide. Since June 2023, the value of the principal lithium compound has diminished by over 75%.
Australia, as the world’s largest lithium ore producer, has felt the impact acutely, having contributed 52% of the global total last year. With the majority of lithium reserves located in Western Australia and some in the Northern Territory, the falling prices have led to mine closures. Core Lithium, based in Adelaide, announced in January the suspension of operations at its Finniss site near Darwin, resulting in 150 job losses due to “weak market conditions.”
In August, US firm Albemarle also decided to reduce production at its Kemerton lithium processing plant, approximately 170 km south of Perth, which is expected to yield over 300 job redundancies. Recently, Arcadium Lithium declared that it would mothball its Mt Cattlin mine in Western Australia, citing low prices.
While some companies are halting operations, others remain optimistic about the global demand for lithium and are expanding their production. Pilbara Minerals from Perth plans to increase its lithium ore output by 50% in the next year. Managing Director Dale Henderson expressed confidence in the long-term outlook for lithium despite current price fluctuations.
Jevons Global founder Kingsley Jones noted that lithium is essential for the energy transition, especially for the growing need for storage batteries powered by solar and wind energy. However, some analysts caution that the oversupply might keep market pressure persistent until at least 2028.
Liontown Resources, another Australian firm, recently began production at its Kathleen Valley mine, which relies on solar energy for 60% of its power. Australia’s Minister for Climate Change and Energy, Chris Bowen, commended the facility’s sustainable practices as the government invested A$230 million in the project.
As Australia plans to increase its lithium refining capabilities, this could potentially lessen its reliance on imported diesel, which is currently its primary energy source. Extracting lithium in Australia typically requires more energy than in major producers like Chile and Argentina due to the mining method employed.
With Australia exporting nearly all its lithium ore as spodumene concentrate to China, current market prices reflect a significant drop. October reports indicated that spodumene prices have reached their lowest since August 2021. Chinese companies refine spodumene into lithium compounds used in batteries, where significantly higher profit margins lie.
Given this price disparity, Australian mining companies are increasingly aiming to construct their own lithium refineries. The first-ever lithium hydroxide was produced in Australia in 2022 by IGO at its Kwinana Refinery, co-owned with Chinese company Tianqi Lithium. Other companies, including Covalent Lithium and Albemarle, are also in the process of building refineries.
Some experts support the development of Australia’s lithium refining capabilities, viewing it as a step towards reducing China’s dominance in the global lithium market, where it currently holds a 60% share. However, Jones emphasizes that Australia should remain open to Chinese investments in lithium, suggesting that limiting such collaborations could harm the sector.
As Australia seeks to bolster its lithium refining sector, government scientists are actively exploring eco-friendlier extraction methods. Current procedures are expensive and lead to significant pollution, particularly chlorine gas emissions. Researchers are working on a new technique, “shock quenching,” that minimizes environmental impact.
In addition to striving for cleaner production methods, Australia aims to enhance its battery recycling capabilities. Lithium Australia is focusing on processing spent batteries to reclaim lithium and other essential metals, highlighting that establishing a domestic battery industry is crucial to ensure that end-of-life batteries are not disposed of ineffectively.