By Eric Onstad
LONDON (Reuters) – Many lithium mines, led by Chinese language operators, are sustaining manufacturing of the uncooked materials wanted for electrical car (EV) batteries, in defiance of costs weak sufficient to set off mass output cuts – offering a boon for battery makers.
The continued manufacturing raises the prospect of years of oversupply and of weak costs.
Some battery makers personal mines or have injected money into operations to maintain them operational, firm studies present.
Mines had been additionally sustaining manufacturing to retain market share and good relations with governments and since closures and restarts can result in technical points, in response to interviews with miners, consultants and analysts.
Thus far, round a dozen lithium producers have quickly shut loss-making mines, trimmed output or delayed expansions.
Many others are nonetheless working, which means the worldwide provide glut of the mineral wanted for batteries for stationary storage, in addition to for EVs, is more likely to final for a number of years and preserve costs low, the business insiders and analysts stated.
The lithium hydroxide worth has slid practically 90% since touching a peak of $85 per kilogram in December 2022, after hovering by greater than sevenfold in the course of the earlier 18 months.
World lithium provide is forecast to rise by 25% this 12 months and 15% in 2025, UBS stated.
“There are some property in manufacturing that shouldn’t actually be, however for their very own causes, they’re ploughing on,” Martin Jackson, head of battery uncooked supplies at CRU, stated.
He estimated about 10% of manufacturing is loss-making.
China has a few of the highest lithium mine prices, however many Chinese language-owned lithium mines at residence and in Australia and Africa are unlikely to shut as a result of they’re built-in into downstream provide chains, analysts and consultants stated.
They famous China’s authorities regards its world main EV and battery sector as strategic and is eager to maintain it thriving with regular uncooked materials provides and low prices.
CHINA’S ZIMBABWE MINES
An anticipated surge in EV gross sales and a spike in lithium costs in 2021 and 2022 in the past led to a rise in new mines.
After costs fell in response to oversupply and weaker-than-expected EV gross sales, funding in lithium mines continued, and final 12 months jumped by 60%, the Worldwide Power Company stated.
A few of the funding stemmed from China’s quest to make sure lithium provides overseas, together with Zimbabwe, which has turn out to be the world’s fourth largest provider of mined lithium within the area of some years.
All 4 working mines are majority-owned by Chinese language firms however are making scant revenue or struggling losses, in response to Cameron Perks, product director of lithium at consultancy Benchmark Mineral Intelligence.
None of them has shut down regardless of prices starting from $600 to $1,000 per metric ton of fabric bought in comparison with a worth of $765 per ton, stated Perks, who visited mines within the nation in latest weeks.
The worth is predicated on spodumene focus containing 6% lithium (SC6), a semi-processed materials ensuing from separating different minerals from lithium ore.
“There is a widespread understanding that Chinese language mum or dad firms might soak up some prices downstream,” he stated.
“There’s additionally the political facet in China, eager to safe their provide chains outdoors of Australia and Canada, the place they’ve had some pushback.”
He stated the best value mine in Zimbabwe, Arcadia, is owned by Zhejiang Huayou , which additionally produces downstream battery cathode supplies.
AUSTRALIA MINES GET OUTSIDE SUPPORT
In Australia, the place prices are additionally excessive, some firms plan to robust it out with assist from battery makers, rejigging mine plans and offsetting losses in lithium with worthwhile manufacturing of iron ore, or nickel.
Mineral Sources (MinRes) final month stated it was placing its Bald Hill mine below care and upkeep.
Nonetheless, it additionally left two different mines producing, though at decrease ranges, together with Mt. Marion, which has increased prices than Bald Hill on an SC6 foundation because of decrease grades, in response to Luke Allum at consultancy Undertaking Blue.
The 2 different mines are collectively owned so MinRes has to seek the advice of with its companions. Mt. Marion mine is 50% owned by China’s Ganfeng Lithium (HK:), which manufactures batteries in addition to being a lithium producer.
“The sweetener for MinRes at Mt. Marion is the mining companies contract from Ganfeng, the place they get a bit further income,” stated Allum.
Australia’s Liontown Sources (ASX:) has saved its new Kathleen Valley mine in operation by trimming output throughout its ramp-up.
Liontown, which posted an annual web loss after tax of A$64.9 million, has been supported by South Korean battery maker LG Power Resolution (LGES), which provided $250 million in funding in July.
LGES, which obtained a 10-year extension to its lithium provide deal from Liontown, has benefited from weak lithium costs, with an official telling an earnings name in July: “As a consequence of weak metallic costs, the superior automotive battery division posted a rise in income.”
