The Federal Government's December Resource Quarterly report has confirmed ongoing concerns in the lithium market, with downgraded forecasts for the next two years. According to the report, lithium export revenue has been revised downward due to unexpectedly rapid price drops, leading to a surplus supply situation that is pressuring prices downward.
The report indicates that lower prices will be somewhat offset by increasing export volumes and a growing share of domestically refined, higher-value lithium products. Short-term concerns about electric vehicle demand and rising lithium supply have driven the recent price declines.
While export volumes of Australian lithium ores and chemicals are expected to grow, export earnings from the battery metal are forecasted to decrease, reaching $14–15 billion in 2023–24 and 2024–25, down from the record levels of $20 billion in 2022–23 and previous estimates of $18 billion and $16 billion.
The report notes that rising lithium inventories have led to unprofitability for high-cost producers, resulting in output cuts. However, most producers remain profitable at current prices. Additionally, the report highlights the development of Australian lithium hydroxide refineries, with a total capacity of 198 kilotonnes of lithium hydroxide by 2030. Investments in low-emissions refining technology, including a lithium phosphate refinery, are also being made.
Mine production is expected to increase over the outlook period, with spodumene output rising to 3.4 million tonnes (Mt) in 2023–24 and 4.0 Mt in 2024–25, up from 3.1 Mt in 2022–23. This increase will be driven by the expansion of existing mines and the commencement of greenfield production at new sites.
Despite these developments, falling lithium prices have led to some mines stockpiling and considering production cuts. The report highlights ongoing construction of three lithium hydroxide refineries, with the potential to refine up to 20% of spodumene mined in Australia domestically.
The report also provides details on specific refineries, including their ownership and production status. Tianqi Lithium Corporation's Kwinana refinery is ramping up production, while Wesfarmers and SQM's Kwinana refinery is under construction. The Kemerton lithium hydroxide refinery owned by Albemarle is operational and undergoing expansion.
Lastly, in August 2023, Pilbara Minerals and Calix Limited committed to constructing a lithium phosphate refinery at Pilgangoora, employing a low-emission refining technology that has the potential to reduce emission intensity significantly.
