Over the last 3 years, the balance of power within the lithium supply sector has shifted, from one dominated by brine producers, to one where hard rock spodumene mines supply the majority of lithium production globally. When it comes to reacting to COVID-19, a mineral-dominated supply industry has both advantages and disadvantages in terms of its capability to react to the sudden temporary closures of mine operations. Mineral operations are better able to ramp-up production after scale downs and closures, and so better able to react to the current turbulent environment. However, mineral operations are typically located closer to populated areas, and so are more likely to undergo lockdown measures.
Based on company announcements to date related to operation scale downs and closures, as well as national, provincial and local governmental measures, Roskill estimates that approximately 110Kt of mined LCE production could be lost over the course of 2020, due directly to actions taken to prevent the spread of COVID-19. Using Roskill’s latest quarterly price forecast for lithium carbonate (published in late-March 2020), this equates to a value loss of approximately US$960M.
The majority of the loss in mined production will come in Q2 2020 as mineral operations in Australia are forced to scale down production or close entirely, with 53% of worldwide Q2 expected losses being attributed to these operations. However, these same operations can also react quickly once lockdown measures are lifted. It is also important to note that, currently, no Australian lithium mines have ceased production entirely, but have merely scaled down due to reduced workforces or other quarantine measures.
In South America, brine operations have been much less affected. Livent announced on 6 April that it would be re-opening its Hombre Muerto operation, while Orocobre has indicated that its Olaroz operation will be able to re-open, with limited activity, in the coming weeks. However, production losses in Argentina are likely to be approximately 35% in 2020, as already delayed expansion plans become delayed further. In Chile, SQM has stated that COVID-19 prevention measures have, so far, had “no material impact” on operations, with other facilities in the Atacama presumed to have seen a similar effect. Roskill anticipates 2020 production losses in Chile to be kept below 20%.
More in-depth analysis of the short-term impacts to the lithium industry, as well as Roskill’s long-term outlook for lithium supply, demand and prices, can be accessed via the Roskill Interactive portal, as part of a subscription to Roskill’s latest lithium market outlook report Lithium: Outlook to 2028, 16th Edition.
Roskill’s Lithium Mining Project Analysis; Technical and Financial Evaluation report reviews the plans of developers evaluating greenfield projects that could contribute to lithium supply in the 2020s. The study aims to help readers understand the potential of new sources of raw materials in this complex commodity market.