Australia's lithium mining boom hit by sagging prices
Often referred to as "white gold," lithium has become the cornerstone of rechargeable batteries, particularly for electric vehicles (EVs). Ironically, this lightweight metal, which can even float on water, is experiencing significant price drops, taking producers and investors by surprise. Within just over a year, the main lithium compound's cost has plummeted by more than 75%, primarily due to dwindling electric vehicle sales and excess supply on the market.
This dramatic shift has harshly affected Australia, the globe's leading lithium producer, representing 52% of the global total last year. The country's vast lithium reserves are predominantly located in Western Australia, with some smaller deposits found in the Northern Territory.
With prices nosediving, some mines are scaling back operations. Core Lithium, headquartered in Adelaide, announced the suspension of mining activities at its Finniss site near Darwin due to "weak market conditions," which resulted in the loss of 150 jobs. Likewise, US company Albemarle revealed it would cut production at its Kemerton lithium processing plant, located about 170 kilometers south of Perth, leading to more than 300 expected job redundancies.
Another player, Arcadium Lithium, recently decided to postpone activities at its Mt Cattlin mine, citing the prevailing low prices affecting operational viability. Despite these cutbacks, not every company is retreating. Pilbara Minerals, based out of Perth, plans to increase production by 50% over the next year, demonstrating confidence rooted in historical market currents. Managing director Dale Henderson reflected, "What we’ve learned historically from lithium pricing is it can come back quickly. The long-term outlook is fantastic."
Analysts remain split about the future of the lithium market. Kingsley Jones, who monitors the mining and metals sector with his investment firm Jevons Global, underscored lithium’s strategic significance for the energy transition. He noted the growing need for reliable storage solutions for renewable energy sources like solar and wind.
Nonetheless, some experts forewarn of overproduction keeping the market under pressure possibly until 2028. Amid this mixed outlook, Liontown Resources is moving forward, having initiated production at its Kathleen Valley mine, located 680 kilometers north-east of Perth, which relies on solar energy for 60% of its energy needs, providing comfort against rising diesel costs.
While Australia is ramping up production, challenges persist. Extracting lithium from the hard rock ore, or spodumene, requires significantly higher energy compared to brine operations utilized by countries like Chile and Argentina, Professor Rick Valenta from the Sustainable Minerals Institute at the University of Queensland explained. The buoyant first world production would turn to be environmentally costly, as it generates more emissions during mining processes.
Currently, Australia predominantly exports spodumene concentrate, largely to China, which refines it to create usable lithium compounds like lithium hydroxide and lithium carbonate. These latter forms have seen premiu prices of up to 72,500 yuan ($10,280) per ton, vastly outselling the spodumene concentrate itself, which hovers around $747 per ton.
This discrepancy has led mining companies to pivot from merely exporting spodumene. The first domestically refined lithium product emerged last year when IGO started producing battery-grade lithium hydroxide at its Kwinana refinery. Meanwhile, Covalent Lithium is also developing its refinery to help reduce reliance on Chinese processing capacities, which currently dominate the sector.
Market experts suggest Australia will need to embrace foreign investment, particularly from China, to stabilize and grow its lithium sector. Relations between Australia and China have taken tense turns since 2020, affecting investment decisions, leading to scrutiny of sales – as shown when Canberra blocked the sale of an Australian lithium miner to a Chinese firm last year. Jones pointed to this trend as short-sighted and potentially damaging for Australia by turning away significant buyers.
Environmental concerns remain ever-present amid Australia’s rush for lithium production. Beyond operational questions, the lithium extraction process is associated with releasing hazardous gases, particularly chlorine. Researchers from the CSIRO are working on innovative methods such as "shock quenching" to potentially offer more environmentally friendly lithium production. The issue of balancing environmental safety and industry growth continues to be at the forefront of the conversation as more companies seek lower emissions practices.
Across the globe, innovative extraction methods are being explored, with optimism springing from recent breakthroughs. Chinese scientists recently published research outlining the extraction of lithium from seawater, demonstrating easier environmental footprints. This patented method utilizes solar-powered evaporation devices to extract lithium more efficiently from natural brines.
Despite the high hurdles associated with lithium extraction for the renewable energy sector, whether from hard rock mining or seawater sources, the overall outlook hinges on continued development, investment, and sustainable practices to meet increasing international demand.
The quest to grow the lithium mining sector remains both compelling and contentious, where every new discovery and method will eventually dictate the industry's overall direction and success.
