Extract from ABC News
Australian miners are in the driver's seat to take advantage of the surge in demand for electric vehicles.
Key points:
- Australia is home to some of the biggest known lithium deposits in the world
- Lithium prices are climbing again as demand for the critical battery metal grows
- Half of Volkswagen's cars will be electric by 2030
Australia is the world's biggest producer and exporter of lithium, a key component in batteries.
It is particularly favoured by electric vehicle (EV) manufacturers because it is lightweight.
With the biggest car maker in the world, Volkswagen, committing to half its cars being electric by 2030, demand for lithium is set to continue soaring.
"The EV demand growth this year has been
really strong," Hayden Bairstow, division director of resources equity
research at Macquarie Capital, said.
That is welcome news for Pilbara Minerals, a lithium miner in Western Australia's north that until recently had dropped its operation down to 30 per cent production after lithium prices began falling in 2018 before bottoming out last year.
It is now back at 100 per cent capacity, with expansion work underway. And it had access to enough capital to buy the lithium mine next door when the market tanked.
"We now refer to those facilities as the Ngungaju plant and we've just announced that we're going to restart those facilities later this year and ramp them up over the first half of 2022," Pilbara Minerals chief executive Ken Brinsden said.
Combined with its
Pilgan open-cut mine, the whole operation will be exporting 580,000
tonnes of spodumene concentrate annually by the end of this year.
"The scale at Pilgangoora is really incredible," Mr Brinsden told The Business.
The miner hopes to double that export capacity within years.
What is lithium?
Lithium, a soft, very light, white metal, is found in spodumene rock formations, and Australia has some of the best-known deposits in the world.
Getting it out of spodumene requires a lot of crushing, then chemical processing and using water to float the light metal where it can be retrieved from the surface.
Australian miners currently export spodumene concentrate, which undergoes even more processing before it can be made into batteries.
The biggest export competitors are Chile and Argentina, but analysts say demand for lithium, particularly from Australia, is not going to wane in the near future.
"As the penetration rates on electric vehicle demand start to rise, we do sort of struggle to find enough lithium to balance the market, particularly towards the end of the decade," Mr Bairstow said.
That lack of supply is helping push prices higher, but not for the first time.
We've been here before
"We saw a very quick demand growth in 2017/18 but it was probably more expectation than actual vehicle sales numbers," Mr Bairstow told The Business.
Asian prices peaked at more than $US21,000 ($28,583) a tonne for lithium carbonate in April 2017, according to Macquarie Research.
"But supply of lithium probably arrived quicker than what was anticipated and that was probably the biggest driver initially as to why prices then corrected back the other way from the peaks that we saw."
Lithium carbonate prices bottomed to a low of about $US7,950 in December last year.
But a price recovery is now well underway.
"We're still sort of $US11,000, $US12,000 a tonne now," Mr Bairstow said.
"So there has been a recovery but we're nowhere near the peak pricing we saw a few years ago."
Mr Brinsden is confident prices will not crash again.
Lithium 2.0
The largest known hard-rock lithium reserve in the world is found just a couple of hours' drive south of Perth, at Greenbushes.
It is owned and run by Talison Lithium, which is itself owned by US miner Albemarle and the Chinese owned Tianqi.
The newest co-owner is IGO, which has just signed a deal with Tianqi to take some of its share of the mine and a processing facility in Kwinana on the southern outskirts of Perth.
Once a gold miner, IGO is repositioning itself as a batteries metals producer.
"In late 2017 we recreated our focus and our purpose, and our purpose is making a difference, and that helped us to totally focus on metals critical to enabling clean energy," IGO chief executive Peter Bradford told The Business.
Australia has historically been a nation that exports raw minerals, rather than turning those materials into physical objects, like iron ore which is made into steel in China.
Exporting lithium in the form of spodumene concentrate for overseas processing has so far been a similar story, but that is about to change.
Later this year, the IGO Tianqi joint venture will become the first operation to export lithium hydroxide, a compound created out of the spodumene, from Australia.
"For too long we have relied on resources, digging dirt out of the ground, putting it on boats, sending it to another country for downstream processing. And as we've done that, we've really narrowed the industrial base of our country," Mr Bradford said.
"For Australia to survive in the future, we need to be thinking now to make sure that in generations to come we have a broad-based society that comprises downstream, comprises manufacturing and we can continue to live the lifestyle we do, as the resources are depleted in the future."
Pilbara Minerals agrees.
About 95 per cent of the spodumene concentrate it produces is exported to China, but it is also working to bring part of the downstream processing onshore.
"By value adding to spodumene locally, there's a really strong opportunity for us to become a materially lower carbon footprint supply base in the lithium raw material supply chain," Mr Brinsden.
Benefits beyond batteries
While the lithium sector is growing, no-one expects it to budge iron ore off the top spot as Australia's key commodity.
"Not with the iron ore the size it is," Mr Bairstow said. "I mean, we're producing a billion tonnes a year effectively out of Western Australia."
He predicts lithium demand globally will peak at just 0.1 per cent of that, forecasting about 1 million tonnes a year will be needed to sustain the EV market.
But adding another burgeoning industry to Australia's mining export dominance is also good news for communities in mining and port regions.
"You want the extra work to come," said Daniel Scott, the owner of North West Brewing Co in Karratha and local government councillor.
During the mining construction boom a decade ago, Karratha was one of the towns to experience the best, and worst, of it.
It brought thousands more people to town, creating jobs and boosting the local economy.
It also created issues such as soaring house prices, housing shortages and difficulty accessing critical services such as health care.
Mr Scott hopes the growth in lithium can help bring more development to his town again, but also in a more sustained way.
"What did make the town busier from the last boom, where there was a construction boom, [is that it] became a maintenance boom because now there's all that extra infrastructure to maintain," he said.
He hopes, like many in the sector, that lithium can become not only a commodity that is exported after it has undergone some of the downstream processing here, but also one day can be manufactured into batteries right here in Australia.
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