Arcadium Lithium announced on Wednesday that it is reassessing its Mount Cattlin operations in Western Australia due to the sharp decline in lithium prices and rising production costs.
This move adds the company to the growing list of lithium producers in Australia reviewing their operations amid a challenging market environment.
The lithium market is currently facing an oversupply issue, with production outpacing demand as electric vehicle (EV) uptake has been slower than anticipated.
CEO Paul Graves revealed that the company is implementing global cost-cutting measures as part of its strategy to navigate the difficult market conditions.
This announcement follows similar steps by Albemarle, the world’s leading lithium producer, which recently paused an expansion at its lithium hydroxide plant in Western Australia and announced job cuts. The company cited the need for a comprehensive review of its global cost and operating structure.
Spot prices for spodumene, a key lithium raw material, have plummeted to around $940 per metric ton in China—the lowest in nearly three years. Goldman Sachs projects that prices will average $800 over the next year.
Given that Australia, which supplies nearly half of the world’s lithium, has higher production costs than South American brine producers, analysts expect the country to be hardest hit by the next round of production cuts.
Analyst Glyn Lawcock from investment bank Barrenjoey noted that Australian mines, which are not fully integrated into chemical or battery production, are more vulnerable to price downturns.
He suggested that the lithium sector may face several challenging quarters if supply continues to grow from single-asset companies that rely solely on lithium production for cash flow.
Examples of high-cost Australian operations include the Mt Marion, Wodgina, and Bald Hill mines, owned by Mineral Resources.
The company reported shipping nearly 500,000 dry metric tons of spodumene in the financial year ending June 2023 but has expressed caution about market conditions and delayed a planned expansion at its Wodgina mine.
“The current market is not as strong as we had anticipated, with prices impacted by softer EV demand from the US and Europe,” said Chris Chong, Mineral Resources’ investor relations manager, during a call with analysts.
