Australia’s lithium industry seen bearing brunt of supply cuts

Arcadium Lithium joined a growing list of producers reviewing lithium operations in Australia amid a rout in prices for the battery raw material that is expected to result in more production cuts.

Rapid supply growth that has outpaced strong projections for demand for lithium from several years ago has met slower-than-expected demand for electric vehicles.

Arcadium is reassessing its Mount Cattlin operations in Western Australia, given high costs and falling prices of raw material spodumene, chief executive officer Paul Graves said as the miner announced a round of cost cuts to its global business.

That comes a week after top lithium producer Albemarle announced job cuts at its lithium hydroxide plant in the state, where it paused an expansion as part of a “comprehensive review” of its global cost and operating structure.

Reflecting compressed margins for producers, spot prices for spodumene in top consumer China are hovering around $940/t, the lowest in almost three years. Goldman Sachs expects spodumene prices to average $800/t over the next year.

Australia, which supplies a little less than half of the world’s lithium, and is higher cost than South American brine producers, is likely to bear the brunt of the next round of production cuts, analysts said.

In places like China and Africa, high-cost supply has already closed, except for integrated mines owned by chemical or battery producers that have been able to turn profits elsewhere in their business.

Supply is still growing in some quarters from single-asset companies that have no choice but to continue building and because it is their only source of cash flow, said said analyst Glyn Lawcock of investment bank Barrenjoey. That would apply to Australia’s Liontown Resources, which has just started production at its 500-Mt/a (550,000-stpy) Kathleen Valley project, while Pilbara Minerals has also just completed an expansion.

High-cost mines in Australia include Mt. Marion, Wodgina and Bald Hill, owned by diversified miner Mineral Resources, which declined to comment. Mineral Resources shipped just under 500 kt (550,000 st) of the raw material in the financial year ended in June. Mount Cattlin shipped around 205 kt (225,000 st) in the 2023 financial year. Mineral Resources said in its quarterly report that it would continue to “closely watch the market,” as it flagged a delay to a planned expansion at its Wodgina Mine. 

(Reporting by Melanie Burton; Editing by Sonali Paul)