Chinese lithium giant axes its refinery expansion plans thanks to market doldrums
China’s Tianqi has axed a major expansion of its lithium hydroxide refinery in Kwinana, Western Australia, as the poor market conditions for the alkali metal hammer the industry.
Chinese lithium giant Tianqi has dealt a hammer blow to Western Australia’s mining industry after axing an expansion of its lithium hydroxide refinery in Kwinana due to poor market conditions.
Tianqi runs the Kwinana facility as part of a joint venture with the ASX-listed IGO Limited, which owns a 49 per cent stake.
The Australian miner on Monday had already flagged a writedown of its share of the plant ahead of its half-year results on February 20.
Tianqi told shareholders on Friday that it had “determined that continuing with the construction of Lithium Hydroxide Project Train II is not economically viable”.
“To avoid further unnecessary use of resources and minimise potential financial losses, while safeguarding the interests of the company and its shareholders, based on the principle of prudence, the company has decided to cease the Lithium Hydroxide Project Train II.”
The trouble-plagued refinery at Kwinana was the first of its kind built outside China but is at risk of being mothballed as the federal government promotes its Made in Australia policy based on downstream processing of critical minerals in the run-up to next year’s federal election.
The plant remains in production, even though the Tianqi-IGO joint venture has struggled to find buyers for lithium hydroxide in recent months.
IGO issued its own statement on Friday, confirming the joint venture had “agreed to cease all works and activities” on the expansion plan.
Citi analysts said the decision was not a surprise and removed a stock overhang in IGO.
“We expect a key question for IGO’s December quarter results will be how much time will they give Train 1 to perform and secondly do/will the economics stack up given conversion costs likely to be $US8000 a tonne excluding feedstock, in our view,” Citi analyst Kate McCutcheon said.
“Investor sentiment towards Kwinana is weak with cash from Greenbushes being consumed by Kwinana; cessation of downstream would, in our view, enable a much simpler capital return story,” the broker added.
The Kwinana refinery was shut down for most of October 2024 for maintenance and improvement works that IGO said had led to better performance.
The Ivan Vella-led IGO said at the time it might take until March to see the full benefits of the latest remedial and improvement work.
The Tianqi and IGO joint venture’s chief executive, Raj Surendran, in November urged the Albanese government to intervene to secure the future of critical minerals supply chains.
The pair also own half of the giant Greenbushes lithium mine in the southwest of WA, rated by analysts as the best and lowest-cost lithium mine in Australia.
The Kwinana setback has followed rival Wesfarmers and its partner SQM commissioning their own lithium hydroxide refinery at a site almost next door to the Tianqi and IGO plant.
Wesfarmers and SQM hope to be producing lithium hydroxide by mid-2025.
Tianqi is a big shareholder in Chilean-based SQM, which, separate to its partnership with Wesfarmers, joined forces with Gina Rinehart to acquire WA lithium hopeful Azure Minerals for $1.7bn.
IGO rose 0.8 per cent or 4c to $5.25 on Friday.