Soaring lithium price drives Albemarle’s WA expansion

Mining giant Albemarle predicts record-high lithium prices will remain elevated this decade amid soaring electric vehicle orders and supply constraints.

Albemarle’s lithium refinery near Bunbury in Western Australia.

Mining giant Albemarle predicts record-high lithium prices will remain elevated this decade amid soaring electric vehicle orders and supply constraints, as it looks to more than double production at its West Australian refinery to meet demand.

Top executives from the $US33bn US-listed producer landed in Perth last week to tour the company’s WA operations, including meetings with joint venture partner Chris Ellison’s ­Mineral Resources – which is considering its own lithium spin-off that could be worth up to $17bn.

Lithium carbonate, a material used in batteries for EVs, has tripled in the past year to hit a new peak in China on Friday, and Albemarle said strong demand was expected to keep prices high this decade as carmakers competed for supply.

“It’s unlike any market that any of us have ever participated in the chemical industry or in the mining industry,” Albemarle’s president for lithium, Eric Norris, told The Australian.

“The sheer magnitude of the shift that came out of the pandemic – from consumer preferences to government policies in China, the US and Europe – to incentivise the adoption of electric vehicles has been incredible. And then that’s been followed through by every single major automotive manufacturer around the world.”

Albemarle, the world’s biggest listed lithium producer, said the market was highly dynamic and constantly changing.

Albemarle President for Lithium Eric Norris predicts the market for the battery making raw material will remain tight this decade.

“We’ve seen a real de-emphasis of further investment in internal combustion engines and a shift of focus from carmakers to increase their production towards electric vehicles. And that’s just created an incredible amount of interest in lithium supply.

“In fact, at this point the industry is just struggling to keep up with demand.”

Albemarle owns a 60 per cent stake in Wodgina – located in the Pilbara and Australia’s second-biggest lithium mine – which it initially mothballed as lithium prices tumbled in 2019. It’s since resumed production and is now operating at two-thirds capacity. Albemarle also owns a share in the Greenbushes lithium mine in the state’s southwest.

A big focus of the visit has been to inspect progress on its Kemerton lithium hydroxide plant near Bunbury in the state’s southeast, where costs have blown out from its original $US1.2bn price tag.

While Mr Norris will not divulge the new budget, he said Albemarle would now consider more than doubling production from the two-train, 50,000-tonne lithium hydroxide facility to keep up with demand, primarily from China.

“The world has changed in many ways since the pandemic. One way in which it has changed – whether it be for geopolitical reasons or security of supply chain reasons – is that increasingly the downstream industry which today is now increasingly an automotive producer, wants the supply chain secure and as local as possible, with minimal risk of either a tariff or delay,” Mr Norris said. “That’s the context and that may give rise to three, four or as many as five units on that site at Kemerton.”

The ASX-listed diversified miner MinRes could reap up to $17bn if it chooses to spin off its lithium unit, one analyst has predicted, and Albemarle said it faced a decision on value.

“Like many companies they are looking at the best way to run their business and create value for shareholders,” Mr Norris said. “It’s their decision on a spin-out but we are confident that whatever happens they’ll continue to be in those assets and part of our partnership.”

Some market watchers have warned of a risk of oversupply in the lithium market, but the Albemarle executive said it was likely to remain tight.

“It’s hard for us as a leader in this industry. It’s much harder even still for newcomers in this industry, in which there are many trying to get in and many are needed to continue to push this supply forward,” Mr Norris said.

“It’s going to be a stretch and it’s going to be hard. And there might be periods of time in the coming years where that is a limitation. But we’re working hard to make sure that’s not the case.”