Home » Lithium Market Shaken by Australian Efficiency and African Uncertainty

Lithium Market Shaken by Australian Efficiency and African Uncertainty

A Citi report reveals how Australia’s mining expertise and innovation capacity have helped it dominate the lithium market, while Africa faces several challenges and risks.

by Motoni Olodun

Lithium, a key component of batteries for electric vehicles and renewable energy, has seen a volatile price trend in the past few years. After a sharp decline in 2020 and 2021 due to oversupply and reduced demand, lithium prices rebounded in 2022 as the global economy recovered from the pandemic and the demand for clean energy surged.

However, the recovery was not evenly distributed across the lithium-producing regions. According to a report by Citi analysts, Australia, the world’s largest lithium producer, has gained a competitive edge over its African rivals by lowering its production costs and increasing its output. The report estimates that Australia’s average cash cost of production fell by 23 percent from 2018 to 2022, while Africa’s average cash cost rose by 9 percent in the same period.

The report attributes Australia’s cost advantage to several factors, such as the use of advanced technology, the availability of cheap natural gas, the proximity to Asian markets, and the diversification of products. Australia produces both spodumene, a hard-rock lithium ore, and lithium hydroxide, a refined chemical product. Spodumene is cheaper to produce and transport, while lithium hydroxide is more suitable for high-end batteries and commands a higher price.

In contrast, Africa’s lithium industry faces several challenges, such as political instability, infrastructure constraints, environmental and social risks, and limited product diversity. Africa mainly produces spodumene, which is more vulnerable to price fluctuations and competition from other regions. The report warns that some African projects may become unviable if lithium prices fall below $600 per tonne, which is possible in the medium term as new supply enters the market.

The report also notes that Australia’s lithium industry is not immune to risks, such as the potential for oversupply, the uncertainty of demand growth, the environmental impact of mining and processing, and the competition from other technologies, such as hydrogen fuel cells. However, the report argues that Australia’s mining expertise, innovation capacity, and market access will help it maintain its leadership position in the lithium market for the foreseeable future.

The report’s findings are consistent with the latest data from the US Geological Survey, which shows that Australia accounted for 55 percent of the world’s lithium production in 2022, followed by Chile with 23 percent, and China with 10 percent. Africa’s share was only 4 percent, despite having the largest lithium reserves in the world.

The lithium market is expected to grow significantly in the coming years, as the demand for electric vehicles and renewable energy increases. According to BloombergNEF, the global lithium demand will increase from 315,000 tonnes in 2020 to 1.4 million tonnes in 2030, and to 5.5 million tonnes in 2050. This will require a massive expansion of the lithium supply, which will create opportunities and challenges for both existing and new producers.

The Citi report suggests that Australia is well-positioned to take advantage of this opportunity, while Africa will need to overcome its challenges and leverage its potential. The report concludes that the lithium market will be dynamic and diverse and that the winners will be those who can adapt to changing conditions and customer preferences.

Source: The Australian


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