Viewpoint: Asia looks beyond China for lithium refining

Spanish Market: Metals
04/01/23

Australia is a major lithium concentrate (spodumene) producer, supplying around 86pc of the global lithium rock market, although lacking domestic refining capability and experience. But it is pushing to develop its own refining capacity to reduce its reliance on China.

Australian spodumene is traditionally shipped to China for processing, which has world-class refining technology allowing it to produce lithium salts effectively and efficiently. Chinese lithium hydroxide exports make up approximately 64pc of the world's total of 64,000t in the first half of 2022, Argus estimates. This creates an inefficient market where both the upstream spodumene and downstream refined products markets are largely dependent on China's domestic economic and political situation.

Chinese Covid-19 restrictions in 2022 reduced domestic lithium refiners' production because of reduced human, capital and commercial resources. This pushed prices for lithium carbonate and lithium hydroxide to hit all-time highs of 561,000-576,000 yuan/t 99.5pc ex-works China and Yn556,000-571,000/t 56.5pc ex-works China, respectively, on 11 November.

With its own refining capacity Australia can take advantage of synergies and maximise economies of scale from upstream to downstream production. This has been done with foreign investment or partnerships with lithium refiners with the appropriate level of technical know-how.

Chinese lithium producer Tianqi Lithium in 2020 formed a joint venture with Australian lithium producer IGO to develop a lithium hydroxide refinery in Kwinana, Western Australia. The Kwinana plant produced Australia's first batch of battery-grade lithium hydroxide in May 2022. The refinery started commercial production on 7 December, the first time lithium hydroxide has been produced in Asia-Pacific outside China. Kwinana currently has production capacity of 24,000 t/yr in its first phase. A planned second phase expansion will add another 24,000 t/yr of capacity but the timeline for this is undisclosed.

Australian spodumene producer Pilbara Minerals has also formed a joint venture with South Korean battery material manufacturer Posco to develop a lithium hydroxide conversion facility in Gwanyang province. Commercial production is expected to start by mid-2023. It will have two production lines, each with a production capacity of 21,500 t/yr of lithium hydroxide. This 43,000 t/yr total is approximately 4.5pc of global capacity.

Australia-based spodumene producer Allkem has also invested in a Japanese lithium hydroxide plant at Naraha. Allkem will supply the plant with lithium carbonate feedstock from its Argentinian Olaroz brine site. Olaroz produced 13,000t of battery and technical-grade lithium carbonate in 2022, while the Naraha plant will have a maximum production capacity of 10,000 t/yr of battery-grade lithium hydroxide. First production started on 10 October and will take a year to reach capacity.

Expanding share

Argus forecasts global lithium capacity to be approximately 1.2mn t in 2023. This will give Tianqi's Kwinana plant 2pc of global capacity, Pilbara's Gwanyang 3.6pc and Allkem's Naraha plant 0.8pc. The three projects combined can produce up to 77,000 t/yr of lithium hydroxide or 6.4pc of global capacity in 2023.

Argus forecasts global demand for lithium carbonate equivalent material to reach 750,000t by 2023. Tianqi, Pilbara and Allkem together can supply more than 10pc of the forecast demand.

Electric vehicle and battery producers will be able to diversify their supply risks with refining capacity based outside China, as they will have an alternative source of lithium. This also lifts market efficiency within the lithium sector, as prices and supplies of refined products will no longer be dictated by Chinese trade policies and its environment.

By Zhichao Zhang

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20/12/24

Viewpoint: Copper volatility, uncertainty ahead in 2025

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Viewpoint: PGM demand from hydrogen sector to rise

20/12/24

Viewpoint: PGM demand from hydrogen sector to rise

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US Congress passes waterways bill

19/12/24

US Congress passes waterways bill

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Q&A: Xcelsior aims to derisk minor metals investment

19/12/24

Q&A: Xcelsior aims to derisk minor metals investment

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EU HRC imports drop a quarter on safeguards, AD probe

19/12/24

EU HRC imports drop a quarter on safeguards, AD probe

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