Battery minerals, Features, Opinion

New ‘mineral dawn’ for Australian mining

lithium market

By Roskill Principal Lithium Analyst Allan Pedersen

Australia has benefited from production and exports of key commodities, such as coal and iron ore, in recent decades. This is a success story which continues and is likely to do so for the foreseeable future, but there is a new “mineral dawn” on the horizon for Australia.

Climate change is moving up on the agenda of governments, as well as consumers throughout the world. Car manufacturers in Europe are facing fines if they do not achieve certain emission thresholds and will therefore increase the rate of introduction of new electric models providing consumers with a greater choice.

Subsidies are also being provided to consumers who purchase low emission vehicles. Chinese consumers have long been provided with incentives to switch to electric vehicles (EV) both in terms of monetary subsidies, as well as regulatory encouragements.

Roskill evaluates the entire EV value chain on a bottom-up approach based on extensive research, which shows the compound annual growth rate for EVs of 21 per cent a year between 2020 and 2030, with the primary growth coming from full EVs as well as plug-in hybrid electric vehicles (PHEV).

Figure 1 – xEV forecast by vehicle type, 2020-2030 (000 units).

The transformation to EVs will be challenging across the value chain. Automotive manufacturers will have to convert existing production to produce EVs which requires billions of dollars of investments across the industry.

Cathode and battery manufacturers will also be required to invest heavily in capacity, both in their own countries as well as new regions to support this transformation.

Roskill’s evaluation and analysis of the lithium-ion (li-ion) battery market shows that installed li-ion battery capacity will experience a compounded annual growth rate of 23 per cent a year between 2020 and 2030. This is expected to see total battery capacity demand for li-ion and lithium-based batteries approach 2500 gigawatt hours (GWh) by 2030, compared to ~250GWh in 2020.   

Figure 2 – Forecast installed Li-ion battery capacity, 2020-2030 (GWh).

This growth and these expansions provide Australia with an opportunity

The need for a large number of metals and minerals used either in battery production or in the production of the motors powering the vehicles are present in Australia. For production of batteries, Australia has significant resources of lithium, cobalt, nickel and manganese, while rare earth products required for the motors are present in multiple deposits in operation or under development in Australia.

Roskill forecasts that the need for all key battery raw materials, as well as rare earth minerals will experience strong growth in the years to 2030. The charts on Figure 3 (below) show demand growth for key minerals between 2020 and 2030.

Figure 3 – Demand growth for critical raw materials*

The charts show strong demand growth for six key EV raw materials used in the battery and drivetrains. The strong demand growth necessitates the need for strong supply growth, and this is where one of the key challenges lies in the lead time and required investment to commission adequate supply of each of these raw materials.

Exploration, permitting, financing, construction, commissioning and product qualification by customers are all challenges shared across raw material supply chains.

The current pricing environment, as well as the price outlook will also be a critical element in the development of sufficient supply. In the lithium market, we saw a temporary oversupply appear in 2018, following additional capacity being brought online ahead of demand growth.

As a result, prices decreased to well below the levels required to incentivise new investments for roughly a two-year period. Demand eventually caught up to supply and prices have risen, but the lack of investments will have a long-term impact on the supply and demand balance.

Furthermore, companies and financial institutions are hesitant to commit capital until prices have stabilised at a level where investment can take place. Continued investment in both brownfield and greenfield projects, as well as new technologies, are needed on a continuous basis.

Australia’s place in the world of lithium is becoming more pronounced. In 2010, Australia mined (refers to mining of minerals as well as brine) 21 per cent of the world’s lithium, measured in LCE. This figure increased to 41 per cent in 2020 with additional mines, such as Pilbara Minerals’ Pilgangoora mine and Galaxy Resources’ Mount Cattlin mine, starting production.

Roskill forecasts that in 2030, Australia’s share of mined lithium will increase to 57 per cent in 2030 with the expansion of existing mines, as well as commissioning of new mines, such as the Wodgina mine owned by Albemarle and Mineral Resources, starting production.

Figure 4 – Australia’s share of lithium mined.

While Australia can derive value from mining and initial processing of lithium minerals, additional value can be gained from further value-added processing. Examples of in-sourcing of processing is seen in the construction of a rare earth processing plant by Lynas Corporation in Kalgoorlie and BHP’s nickel sulphate processing plant in Kwinana.

Up until the end of 2020, Australia did not have any lithium conversion facilities operating to value-add to the spodumene concentrate produced in the country.

Figure 5 – Australia’s share of refined lithium.

In 2021 this is expected to change. Albemarle and Mineral Resources are scheduled to commission a 50,000 tonnes per year lithium hydroxide plant at Kemerton in Western Australia and Tianqi Lithium will commission the first of two 24,000 tonnes per year of lithium hydroxide production lines in Kwinana. This will be followed by Covalent Lithium, a joint venture between Wesfarmers and SQM of Chile, commissioning a 50,000 tonnes per year lithium hydroxide plant later this decade.

As a result, Roskill forecasts that by 2030, production of lithium chemicals in Australia will account for 11 per cent of world production.

The significant investments made into these processing facilities will be of huge benefit to the Australian economy and create additional jobs.

The continued success for Australia has strong links to the rest of the world. While Australia can mine and process minerals, it cannot operate in a vacuum. The relationships formed by the Australian Government with the United States, targeting the strategic exploration and sourcing of critical raw materials present opportunities to be highly beneficial to Australian companies. The foundations for a relationship that extends into other minerals such as rare earth, nickel and cobalt has been formed and can be built upon.

In the future, a close relationship with Europe could provide great mutual advantages. The European Commission has outlined a pathway for an increasing electromobility, but Europe is lacking the raw materials needed to form a fully intra-Europe value chain, materials which are mined and processed in Australia and could be supplied to a fast-growing European market.

Resources mined and processed in Australia will be of increasing interest to the downstream value chain, not only for supply security by also because of sustainability. The ESG (environmental, social and government) credentials of Australian products are very strong.

The social laws and ethics in Australia ensure that workers are treated in humane ways with extensive rights. Government support and regulatory framework for miners are strong across the country. From an environmental point of view the strong credentials continue and will grow stronger as renewable energy increases in the overall energy mix.

This article was supplied by Roskill exclusively to Australian Resource & Investment. All information and tables are sourced from Roskill and are accurate as of May 2021.

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