Weekly Metals Digest (Jan 8-12)
This Week in Metals: Alcoa's Refinery Closure, Saudi Arabia's Gold Discovery, and Lithium's Market Dynamics
Alcoa Announces Significant Reduction at Kwinana Alumina Refinery
Alcoa, a prominent US metals corporation, is set to completely shut down its Kwinana alumina refinery in Australia this year. The shutdown process is slated to begin in the second quarter of 2024 and conclude in the third quarter, leading to the plant's mothballing. As a result, Kwinana’s workforce will be significantly reduced from 800 to 250 employees initially. After a year, this number will further decrease to just 50 employees, dramatically impacting the local job market.
The Kwinana refinery, with a yearly production capacity of 2.2 million tonnes of alumina, has been operating below its maximum capacity at 80% since last year. Alcoa’s decision to shut down the refinery was influenced by several factors including the plant’s advanced age, being 60 years old, alongside the deteriorating quality of bauxite it processes and the escalating production costs. This closure follows a series of shutdowns by Alcoa over the past decade across its plants in the US and Europe, triggered by fluctuating global prices for primary aluminum and alumina, coupled with rising operational costs.
Saudi Arabia's Potential Surge in the Gold Market
Saudi Arabia's state-owned company, Maaden, has made a potentially game-changing discovery of gold deposits near its operating Mansoura Masala mine. This discovery could elevate Saudi Arabia to a significant position in the global gold market. Preliminary analysis suggests the possibility of a large gold deposit or an entire gold ore belt, with rock samples exhibiting gold concentrations ranging between 10.4-20.6 grams per tonne, implying reserves of at least 42.5 tonnes.
Currently, Saudi Arabia is not a major gold producer on the global stage, despite having considerable state gold reserves exceeding 320 tonnes. The Mansoura Masala mine, the country’s sole operational gold mine, has a limited annual production capacity of just 7 tonnes of gold. However, with the national economy heavily reliant on hydrocarbon exports, the government is encouraging diversification through such mining projects. If further exploratory work confirms and develops these large deposits, Saudi Arabia could challenge leading gold-producing nations like Australia, Russia, China, the US, South Africa, and Canada.
Glencore and Lifezone Metals Embark on Joint Venture for Metal Recycling
Glencore, an international mining and metals conglomerate, has entered into a collaboration with venture capital firm Lifezone Metals to pioneer a metal recycling project. This joint venture, commencing with a $3 million investment for the first phase, will focus on recycling platinum, palladium, and rhodium from end-of-life automotive catalytic converters. Following the completion of the first phase in the first half of this year, plans are in place to construct a full-scale recycling facility in the US. Glencore has committed to financing the establishment of this plant.
The proposed facility aims to process up to 115,000 troy ounces of these precious metals annually. Glencore, as a co-founder, will take on the responsibility of marketing and selling these recycled metals on the global stage. This venture signifies an important step towards sustainable metal recycling, aligning with global environmental goals and potentially reshaping the market for these valuable metals.
International Resources Holding to Revitalize Zambia’s Mopani Copper Mines
International Resources Holding, based in the UAE, is preparing to take control of Zambia's Mopani Copper Mines in the upcoming weeks. This transition comes with a substantial modernization plan aimed at enhancing the mines' copper ore mining and processing capacities. The company has committed a total investment of $620 million to rejuvenate Mopani Copper Mines, with an initial investment of $130 million planned before assuming management.
The mines are currently facing several operational challenges, including reduced copper ore grades, water inundation in some mining areas, and outdated processing equipment. In addition to these operational upgrades, there are plans to improve employee compensation. This investment is expected not only to increase copper production but also to bolster the Zambian economy, as the state heavily relies on mineral exports for its budget.
Lithium Prices Witness Steep Decline
The global market for lithium, a critical component in electric vehicle batteries, has seen a drastic price decrease over the last year. By the end of 2023, lithium prices had fallen by 80%, with lithium carbonate currently priced at just $13.446 thousand per tonne, a three-year low. This significant price drop is attributed to a decrease in lithium orders from battery manufacturers for electric cars and an increase in supply due to the commissioning of new mines and expansion of existing operations over recent years.
The Australian Office of the Chief Economist anticipates a continued downward trend in lithium prices throughout 2024-2025. In response to this market shift, several high-cost lithium producers have already reduced their output. Even the management of Greenbushes, the world’s largest lithium mine, is considering production cuts as unsold spodumene concentrate accumulates in their warehouses. Despite this, the global supply of lithium is expected to continue growing in 2024, further exerting downward pressure on prices.
Forecast: A Long-term Rebound in Lithium Prices Expected
Despite the current downturn, the long-term outlook for global lithium prices remains positive. Transparency Market Research predicts significant growth in the lithium market, forecasting an increase from approximately $9.3 billion in 2022 to $32.2 billion by 2031, representing an annual growth rate of 14.8%. This market expansion is expected to be driven by the continued development and mass adoption of electric vehicles, advancements in lithium-ion battery technology, supportive government policies for eco-friendly transportation, and the development of new lithium compounds for a broad range of industrial applications. These factors will likely contribute to a resurgence in lithium demand and prices in the coming years, reasserting lithium's critical role in the global transition to sustainable energy solutions.
