Often referred to as “white gold,” lithium is a crucial ingredient in rechargeable batteries. This lightweight metal, known to float on water, has experienced a significant price drop over the past year.
The decline in lithium prices is primarily attributed to decreasing global sales of electric vehicles and an oversupply of lithium ore worldwide. Since June 2023, the cost of lithium compounds has plummeted by more than 75%.
Australia, being the world’s largest producer of lithium ore, accounting for 52% of global output last year, has felt the impact of this price drop the hardest. The majority of its lithium resources are located in Western Australia, with some also found in the Northern Territory.
As lithium prices fell sharply, several mining operations have been forced to halt. Core Lithium, based in Adelaide, announced in January that it was suspending mining activities at its Finniss site near Darwin, resulting in the loss of 150 jobs due to what they termed “weak market conditions.”
In August, US company Albemarle declared it would reduce production at its Kemerton lithium processing plant, located approximately 170km south of Perth, leading to over 300 job losses. More recently, Arcadium Lithium announced it will mothball its Mt Cattlin mine in Western Australia, citing low prices as the cause for its decision.
Despite these setbacks, some companies remain optimistic, believing that the global demand for lithium will rebound. Pilbara Minerals, a Perth-based miner, plans to increase its lithium ore production by 50% over the next year. Managing Director Dale Henderson expressed confidence in the long-term outlook for lithium, stating that historical pricing trends show rapid changes are possible.
This optimism is shared by Kingsley Jones, founder and chief investment officer at Jevons Global, who underscores the strategic importance of lithium in the energy transition. He predicts continued growth in demand for storage batteries due to the rising need for renewable energy sources, like solar and wind.
However, some analysts caution that the market may remain under pressure from oversupply until at least 2028.
Perth-based Liontown Resources has also ramped up lithium production, initiating operations at its Kathleen Valley mine in July. The facility, located 680km north-east of Perth, utilizes a solar panel farm for 60% of its energy needs, a move praised by Australia’s Minister for Climate Change and Energy, Chris Bowen.
Australia’s reliance on renewable energy sources is beneficial for miners, as it decreases their dependency on costly diesel, the dominant fuel for electricity generation in the sector.
Lithium extraction in Australia is more energy-intensive compared to countries like Chile and Argentina, with mining the ore from solid rock rather than evaporating brine from salt flats. This high energy requirement leads to increased emissions in Australia’s hard-rock mining operations.
The majority of lithium exported by Australia is in the form of partially processed spodumene concentrate, primarily sent to China for refining. The recent price drop for spodumene mirrors the decline in refined lithium prices. Reports indicate that spodumene prices have reached their lowest levels since August 2021.
Chinese firms refine spodumene into lithium compounds used in batteries, which commands significantly higher prices. As a result, Australian mining companies are increasingly investing in their own lithium refineries. In the past year, 98% of the spodumene produced was exported instead of being refined domestically.
The first refined lithium production in Australia began in 2022 at the Kwinana Refinery, co-owned by Perth-based IGO and Chinese company Tianqi Lithium. Additional refineries are in development, including one by Covalent Lithium, and despite Albemarle’s reduction in output, it maintains a refining facility.
Some industry observers welcome Australia’s move towards local lithium refining, viewing it as a step towards diminishing China’s dominance in the global lithium market, as China currently accounts for 60% of refining operations.
However, Kingsley Jones argues that Australia should be more willing to accept Chinese investment in its lithium sector, noting that the Australian government’s recent strategies may discourage crucial funding from the largest buyer. This divergence follows a decline in relations between Australia and China since 2020, including recent government decisions blocking Chinese acquisitions of Australian lithium operations.
While Australia aspires to enhance its capacity as a lithium refiner, research is ongoing to develop more environmentally friendly extraction processes. Currently, the industry faces issues with the environmentally harmful chlorine gas emitted during conventional lithium extraction methods.
The CSIRO’s Dongmei Liu is exploring a new process termed “shock quenching,” which aims to eliminate chlorine gas emissions through extreme cooling techniques.
Additionally, Lithium Australia focuses on recycling batteries to recover lithium and other metals for reuse, which the company’s leadership sees as crucial for establishing a self-sufficient battery manufacturing industry in Australia.