Often referred to as “white gold,” lithium is a vital element in rechargeable batteries and is so light that it can float on water. However, its price has plummeted significantly over the past year.
The decline in lithium prices can be attributed to decreasing global electric vehicle sales and an oversupply of lithium ore worldwide. Since June 2023, the price of the primary lithium compound has dropped by more than 75%.
Australia, the largest producer of lithium ore—accounting for 52% of the global supply last year—has been particularly affected. The country also possesses the second-largest lithium reserves, with the majority located in Western Australia.
The fall in prices has led to several mine closures. In January, Core Lithium announced it would suspend operations at its Finniss site near Darwin, affecting 150 jobs due to “weak market conditions.” In August, the US firm Albemarle revealed plans to reduce production at its Kemerton lithium processing plant, which will likely result in over 300 job losses. Likewise, this month, Arcadium Lithium decided to mothball its Mt Cattlin mine in Western Australia, citing low prices.
Despite some producers halting operations, others are expanding, anticipating a resurgence in global lithium demand and prices. Pilbara Minerals plans to increase its lithium ore production by 50% within the next year, and its managing director has expressed confidence in the long-term outlook for the industry. Kingsley Jones, from Jevons Global, echoed this sentiment, stating that lithium is crucial for the energy transition, particularly with the rise of storage batteries as renewable energy becomes more prevalent.
However, some analysts are concerned that the market’s oversupply will keep lithium prices depressed until at least 2028. In response, Liontown Resources has initiated production at its Kathleen Valley mine in Western Australia, leveraging renewable energy sources for most of its operations.
Australia’s government has praised this move towards sustainability, investing significantly in facilities that prioritize renewable energy. However, production in Australia is more energy-intensive compared to methods used in Chile and Argentina, where lithium is extracted from brine.
The extraction process in Australia involves hard-rock mining, which is more energy-consuming and emits more pollution. Most lithium exported by Australia is in the form of spodumene concentrate, which has also seen prices decline sharply.
The majority of this spodumene is refined in China, where it is converted into the two lithium compounds used in batteries. With a significant price gap between these compounds and spodumene concentrate, Australian mining companies are focusing on establishing their own lithium refineries. In the last financial year, 98% of lithium was exported as spodumene concentrate.
The first commercially refined lithium in Australia emerged in 2022, with IGO producing battery-grade lithium hydroxide at its facility in Kwinana, co-owned with Tianqi Lithium. Other companies like Covalent Lithium are also developing their refineries.
Some experts believe that increasing lithium refining capabilities in Australia could reduce China’s dominance in the global lithium market, as China currently oversees 60% of lithium refining. However, there are calls for Australia to be more accepting of Chinese investment in the sector, particularly as diplomatic relations have cooled.
Amidst these developments, Australian scientists are researching environmentally friendly methods for lithium refining, working on a new process that minimizes harmful emissions. Efforts are also underway to establish a circular battery industry in Australia, focused on recycling end-of-life batteries to reclaim lithium and other metals, thereby ensuring the country can maintain its own battery production capabilities.