Lithium: Mine supply cut as demand growth falls short of expectation

The sustained fall in prices has started to show its impact on the lithium supply chain, with a raft of production cutbacks and delays to expansions being announced in recent months. These have been most significant in Australia, which has seen a sharp growth in mined lithium output since 2016.

Talison Lithium recently announced that it had paused the further expansion of the Greenbushes mine in Western Australia, as the company’s owners, Tianqi Lithium and Albemarle, tempered their plans for the development of their local spodumene to lithium hydroxide processing capacity in Kwinana and Kemerton respectively. Construction of the mines second chemical-grade spodumene plant (CGP2) has been completed but the construction of a third plant has now been postponed despite the project receiving the green light from the Environment Minister.

Elsewhere, Pilbara Minerals, which recently scaled back its expansion plans for its Pilgangoora mine has reportedly stopped mining activities (for around two months) and has reduced its workforce in response to the weaker market conditions. Meanwhile, Alita Resources, owners of the Bald Hill mine, entered administration in late-August.

Roskill View

Third-party spodumene prices are expected to average US$550/t (6% Li2O) in Q3.19, down from around US$1,000/t at the end of last year as demand growth for lithium continues to fall short of market expectation. Furthermore, our forecast now sees lithium prices remaining lower for longer as weak market conditions persist; we have recently revised down our near-term demand projections by around 10% on the back of slower growth for lithium-ion batteries. As a result, the suspension of more lithium production capacity over the coming months seems likely.

Roskill’s Lithium: Outlook to 2028, 16th Edition was published in July 2019. Click here to download the brochure or access further information.

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This article was written by David Merriman. Please get in touch below if you wish to discuss further:

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