Arcadium Lithium Joins List of Australian Producers Reevaluating Operations Amid Falling Prices
Arcadium Lithium has announced a review of its operations at Mount Cattlin in Western Australia, joining a growing number of lithium producers reassessing their strategies due to plummeting prices for the battery raw material. The lithium market has been shaken by a rapid increase in supply that has outpaced demand projections from several years ago, as the adoption of electric vehicles has been slower than expected.
Arcadium's CEO, Paul Graves, stated on Wednesday that the company is reevaluating its Mount Cattlin operations due to high costs and declining spodumene prices. This announcement comes on the heels of Albemarle, a leading lithium producer, declaring job cuts at its lithium hydroxide plant in Western Australia, where it has also paused expansion plans as part of a global cost and operating structure review.
Spot prices for spodumene in China, the largest consumer, have dropped to around $940 per metric ton, the lowest level in nearly three years. Goldman Sachs predicts that spodumene prices will average $800 over the next year.
Australia, which supplies nearly half of the world's lithium, faces significant challenges as it is more costly than South American brine producers. Analysts anticipate that Australia will experience the brunt of upcoming production cuts. In regions like China and Africa, high-cost supply has already been curtailed, except for integrated mines owned by chemical or battery producers that can profit elsewhere.
Glyn Lawcock, an analyst at investment bank Barrenjoey, noted that Australian mines, which are not fully integrated, are more vulnerable to price downturns. "If we don't get any more announcements, no more closures, and the ramp-ups underway continue, then it does feel like there's probably a few quarters of tough footy for the lithium space," he remarked.
Supply growth continues from single-asset companies that must proceed with production to maintain cash flow. This applies to companies like Liontown Resources, which recently commenced production at its 500,000 tons per year Kathleen Valley project, and Pilbara Minerals, which has completed an expansion.
High-cost Australian mines include Mt Marion, Wodgina, and Bald Hill, owned by diversified miner Mineral Resources, which has declined to comment. Mineral Resources shipped just under 500,000 dry metric tons of spodumene in the financial year ending June, while Mount Cattlin shipped approximately 205,000 tons in 2023.
Mineral Resources indicated in its recent quarterly report that it would "closely watch the market," citing a delay in planned expansion at its Wodgina mine. "The current market is not as strong as we had thought. Prices have been impacted by softer EV demand from the U.S. and Europe," said Chris Chong, investor relations manager, during a call with analysts.
