Australia has the potential to generate up to $US10 billion ($14.8 billion) in additional revenue from lithium hydroxide, McKinsey & Company believes.
The opportunity starts with Australia’s globally leading spodumene concentrate production and could lead to the establishment of a new industry if done correctly.
McKinsey – a global management consulting firm – highlights that while the chemical makeup of electric vehicle (EV) batteries varies, lithium is included in all compositions. This will support the commodity’s demand into the future.
“Lithium is expected to remain the primary raw material for batteries for the foreseeable future,” McKinsey said in its report, Australia’s potential in the lithium market.
“Historically, battery technology relied on lithium carbonate. More recently, better-performing high-nickel NMC batteries (composed of lithium nickel manganese cobalt oxide), which instead rely on lithium hydroxide, have been introduced.”
McKinsey said lithium hydroxide demand could overtake lithium carbonate demand by 2030 as NMC batteries become more popular.
In 2022, global lithium hydroxide demand was estimated to be 0.18 million tonnes of lithium carbonate equivalent (LCE), with global interest for lithium carbonate equating to 0.46 million tonnes of LCE.
By 2030, McKinsey estimates global lithium hydroxide demand would increase to 1.54 million tonnes of LCE, with global lithium carbonate demand increasing to 1.21 million tonnes of LCE.
Australia is beginning to realise its downstream lithium processing opportunity, with the Kwinana and Kemerton lithium conversion plants in WA both in either production or commissioning phases.
McKinsey expects Australia’s lithium hydroxide production to be approximately 234,000 tonnes of LCE by 2030, with spodumene production to be approximately 716,000 tonnes of LCE by this point.
The 482-tonne gap between lithium hydroxide and spodumene production represents Australia’s downstream opportunity, with potential benefits in revenues, margins and employment.
“In a scenario where lithium hydroxide is valued at $10 to $20 per kilogram of LCE more than spodumene in 2030, revenues could rise by approximately $4.8 to $9.6 billion,” McKinsey said.
“A more promising revenue scenario may also emerge at the significantly higher 70 to 85 per cent margins available to integrated refineries, compared with the 40 to 60 percent margins available to non-integrated global refiners.”
And Australia has its jurisdictional advantages, with the potential to be a low-cost, reliable supplier of lithium hydroxide given the close proximity of its spodumene production, while also being a key trade beneficiary of the US Government’s Inflation Reduction Act.
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