From sizzle to fizzle: What happened to lithium and will things get better for WA miners?

Listening to some experts, you’d think the future of humanity hangs on lithium and its power to kickstart a global clean energy revolution. This so-called future-facing metal is a key component of batteries fuelling the electric vehicles that are helping to reduce our reliance on dirty, fossil fuel-burning combustion engines. Indeed, there’s plenty of miners who, in large part, owe the existence of some mining projects to the lucrative supply deals they managed to strike with some big industry names — think Tesla, Ford and Kia. It’s clearly a vital part of our future. So why is the State Government now stepping in to prop up an industry you’d think would be flush with quillions of dollars from investors clamouring to be part of this clean and green technology? Great question. Let’s find out ... First, what is lithium? It’s the lightest metal and one of the least dense elements. It’s also a good conductor of heat and electricity, which makes it a crucial ingredient for rechargeable batteries in devices like smartphones, laptops and electric vehicles. The great news for us is that Australia has plenty of it. WA is also home to the world’s largest hard-rock deposit at Greenbushes in the South West. It’s also the only State in the nation at present that mines it. Who owns that (and all of WA’s other deposits)? Greenbushes is a joint venture between Tianqi Lithium, Talison Lithium and Australian-listed IGO. It also has a value-adding (though slightly troubled) lithium hydroxide facility at Kwinana. US chemicals giant Albemarle also has a lithium hydroxide plant at Kemerton near Bunbury. WA is one of the biggest global suppliers of lithium spodumene concentrate. Other mines include: What about prices for this vital stuff? Well, that’s another story. Lithium prices have experienced massive fluctuations over the past five years, driven mainly by the growing demand for electric vehicles and renewable energy storage. They broke records in 2022 as a rally took prices for a tonne of lithium spodumene to more than $US6000. Happy days. But the start of 2023 brought about the start of a severe price retreat that left many miners reeling, with some deeming it uneconomical to continue. Those operations have been placed on care and maintenance as their owners wait out a rebound that is taking its time to come about. Prices plunged by about 80 per cent to under $US1000/t. There have been some minor recoveries but most have been mere blips. The price is currently sitting at about $US1054/t. An expansion in Chinese subsidies encouraging people to trade in older cars has helped recent rebounds, and EV manufacturers there are on track to hit ambitious annual sales targets. Restocking activity is also picking up. There’s also speculation that Donald Trump’s election win in the US may be encouraging Chinese battery makers to snap up lithium ahead of a likely trade war. What happened? Supply. Too much of it. That and the steady decline in electric vehicle sales as consumers still wary of going full EV instead embraced hybrids. The drawn-out slump in the lithium market this year has led to mines closing or cutting costs in Australia, China and elsewhere. Albemarle is putting pressure on partner MinRes to scale back output at Wodgina as it looks to cut costs. Liontown has also been forced to cut dozens of white collar jobs in Perth while it tries to keep its head above water and ride out the market downturn. There’s been 190,000t of lithium mine capacity curtailments since late 2023, and another 50,000t of delayed projects, according to CRU Group. The market has “significantly tightened”, but CRU still sees a surplus next year, given the weakening demand growth. So, where to now? There’s still plenty of belt-tightening across WA’s lithium players as they try to keep rising production costs under prevailing market values. Despite the uptick in China, the short-term global EV demand outlook remains gloomy as automakers delay new roll-outs, and rising protectionism is likely to weigh on consumption over the longer term. There’s a risk the recent uptick could trigger some supply coming back, according to China Futures’ Zhang. “The market surplus situation hasn’t fundamentally shifted yet.”