The rout in lithium continues worldwide after Albemarle and Arcadium last week and this week slashed mine, refinery, and exploration budgets in Australia, the US, Chile, and Argentina.
The industry now awaits SQM's cost-cutting measures to match declining revenue and losses. As the world’s second-largest producer, following Albemarle's aggressive cuts, SQM is expected to follow suit.
Other companies are also trimming expenses. Mineral Resources of Perth is cutting costs and closing at least one mine, while Pilbara Minerals and IGO have implemented multiple rounds of cuts. IGO is even abandoning nickel to focus on lithium, a questionable move given the current market conditions.
The spotlight is now on Wesfarmers and SQM's joint venture, Covalent Lithium, and their Kwinana hydroxide refinery. SQM, also involved in the Azure Minerals joint venture with Gina Rinehart's Hancock Prospecting, faces uncertainties about the Andover spodumene deposit due to falling prices.
SQM's second-quarter production and financial results are expected around August 20-21.
Arcadium is reassessing its high-cost Mount Cattlin operations in Western Australia, considering the need to go underground and declining spodumene prices. This follows Albemarle's job cuts and expansion pause at its lithium hydroxide plant in the state.
Compressed margins have pushed spot spodumene prices to a nearly three-year low of around US$940 per tonne in China. Australia, a higher-cost producer than South America, is experiencing the brunt of production cuts.
Chile, benefiting from government support after last year's virtual nationalization, will likely prioritize domestic production cuts before impacting Australian operations. Unlike higher-cost producers, integrated mines owned by chemical or battery companies have managed to remain profitable.
The performance of Liontown Resources, now dominated by Hancock Prospecting, and Pilbara Minerals will be closely watched. High-cost mines like Mt Marion, Wodgina, and Bald Hill, owned by Mineral Resources, are facing challenges. IGO's shift to lithium from nickel is another industry development.
Investors are also monitoring Wesfarmers' potential impairment of its 50% stake in the Mount Holland joint venture with SQM.
