Australia’s Got a Lock on Supply of the Metal Used for EV Batteries
By
David Stringer
October 26, 2017, 4:00 AM GMT+10
From
- Mining powerhouse to add 60% of new supply through 2022: CRU
- Nation could add processing plants for higher-value exports
Ground zero in the global scramble for
lithium is a small patch of northern Australia’s iron-ore rich outback, where work is accelerating to deliver the world’s next major mines to feed soaring demand from electric vehicle battery makers.
Almost 60 percent of supply from planned large projects through about the next five years will be added in Australia, enabling the
top supplier of lithium to cement its grip on the market, according to CRU Group. The biggest mines due to enter production next year are both about 120 kilometers (75 miles) from Port Hedland, the gateway to markets in China.
Altura Mining Ltd., which expects to start output in the first three months of 2018, is on schedule and already studying a rapid expansion to more than double capacity, according to Managing Director James Brown. Next door,
Pilbara Minerals Ltd. is targeting a second-quarter start at a site with capacity to become the world’s second-largest hard rock lithium mine.
Along with nearby
Mineral Resources Ltd.’s Wodgina mine -- the biggest known hard rock lithium deposit -- these and other projects form an emerging cluster of global production, according to Altura’s Brown. “The Pilbara will be the most significant supplier” to Asia, he said in an interview. The region “does lend itself to becoming a hub, probably the size of which the world hasn’t seen,” he said.
Rising Chinese demand for lithium-ion batteries needed for electric vehicles and energy storage is
driving significant price gains. More than half of all new car sales and a third of the total global light-duty vehicle fleet will be electric by 2040, Bloomberg New Energy Finance
said in a July report.
Even as
multiple new sources of supply emerge in the longer term, Australia will remain dominant, according to Bloomberg New Energy Finance forecasts. The nation will account for about 37 percent of production in 2027, ahead of Argentina’s 18 percent share, it said in a
report this month.
“Australia’s importance has been cemented by offtake deals and equity investments in mines,” Alice Yu, a Hong Kong-based consultant at CRU, said by phone. Backing from major battery manufacturers and auto producers could also see the nation add processing facilities to develop exports of higher-value lithium chemicals, she said.
Read More: Electric Car Boom Drives Rush to Mining’s $90 Billion Hub
Perth-based Pilbara Minerals has attracted
supply deals and investments, including from
Jiangxi Ganfeng Lithium Co. and
Great Wall Motor Co., China’s biggest maker of sport utility vehicles, while
Jiangxi Special Electric Motor Co.this month
agreed to invest in Australian developer Tawana Resources NL. Altura may seek to add further partners for a mine expansion, according to Brown.
Still, Macquarie Group Ltd. has warned there’s a bearish outlook for lithium prices in the short-to-medium term as “too many Australian rock producers are crowding in” with new projects. The surge is threatening to create a period of oversupply before rising demand for electric vehicles clears the surplus from about 2021, the bank said in a note this month.
Prices stabilized in September, though remain at a high level with a lack of available raw materials,
according to industry consultant Benchmark Mineral Intelligence. They may continue to rise as production probably needs to quadruple within a decade to meet demand for electric vehicles, a supply scenario that’s rare in the history of any commodity, Goldman Sachs Group Inc. analysts
said in an Oct. 12 note.
Even with a wave of new supply, including from Australia, the lithium market is likely to remain tight with a stronger demand outlook than anticipated, according to Melbourne-based UBS Group AG analyst Lachlan Shaw. “We have had increased supply this year, and all the while lithium prices have kept going up,” he said. “The market is probably underestimating demand.”
While projects that’ll be delivered by new and existing producers by the mid-2020s will help ease the current scramble for raw materials, it’s possible the lithium market may experience further periods of supply constraint in the future without continued additions to capacity, Bloomberg New Energy Finance said in the report this month.
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