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Australia’s Lithium Market Faces Turbulent Times: What’s Next for ‘White Gold’?

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Lithium, often referred to as “white gold” and a vital element in rechargeable batteries, has seen a significant decline in price over the past year. The metal is lightweight enough to float on water, a stark contrast to the way its value has dropped dramatically.

This price plunge is largely attributed to declining global electric vehicle sales and an oversupply of lithium ore. Since June 2023, the price of the primary lithium compound has fallen by more than 75%.

Australia, being the largest producer of lithium ore globally, contributing 52% of the total production last year, is feeling the impact most acutely. The majority of the country’s lithium reserves are found in Western Australia, with a smaller portion located in the Northern Territory.

In light of the price drop, several mining companies have ceased operations. Core Lithium, based in Adelaide, suspended its Finniss mine near Darwin in January, resulting in the loss of 150 jobs due to “weak market conditions.” Shortly after, Albemarle, a US company, announced it would reduce production at its Kemerton processing plant, leading to over 300 layoffs. Recently, Arcadium Lithium also decided to mothball its Mt Cattlin mine, citing low prices as the reason.

While some companies are scaling back, others are pursuing expansion, hopeful that demand and prices for lithium will recover. Pilbara Minerals, for instance, plans to increase its lithium ore production by 50% in the coming year. Managing director Dale Henderson expressed confidence in the long-term prospects for lithium, despite the current fluctuations in pricing.

Investment expert Kingsley Jones emphasized the strategic importance of lithium in the energy transition, particularly for battery storage as renewable energy becomes more prevalent. However, some analysts caution that oversupply may put pressure on the market until at least 2028.

Liontown Resources also continues to ramp up lithium ore production, having recently initiated operations at its Kathleen Valley mine, which utilizes renewable energy sources, decreasing dependency on expensive diesel fuel.

The Australian government is supportive of these green energy initiatives, investing AU$230 million in the Kathleen Valley facility. Nonetheless, extracting lithium in Australia is significantly more energy-intensive compared to other leading producing countries like Chile and Argentina.

The extraction process in Australia requires mining solid rock for spodumene ore, contrasting with the evaporation method used in South America. Experts highlight that this leads to greater energy use and emissions from Australian operations.

Australian exports primarily consist of partially processed lithium ore, which is mainly shipped to China for further refinement into lithium derivatives used in batteries. The rapid decline in spodumene prices has followed the trend observed in refined lithium, with recent reports indicating that spodumene reached its lowest price since August 2021.

Given the higher market value of lithium compounds like lithium carbonate compared to spodumene concentrate, Australian mining firms are increasingly investing in lithium refineries domestically instead of relying on exports. The first commercial production of refined lithium in Australia began in 2022, and more companies are planning similar facilities to reduce China’s current lead in the global lithium refining market.

While Australia aims to become a significant player in lithium refining, calls for greater openness towards Chinese investment have emerged, particularly after the Australian government has taken measures to limit such partnerships due to geopolitical tensions.

Research into more environmentally friendly lithium extraction and recycling processes is ongoing, with new methods being explored to minimize harmful emissions and enhance efficiency. Companies like Lithium Australia are focused on creating a circular battery industry through the recycling of spent batteries to recover valuable materials.

As Australia navigates its position in the global lithium market, it seeks to balance expansion in production with sustainability and environmental considerations.

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