The Australian lithium industry is experiencing significant challenges as producers, including Arcadium Lithium, reassess operations due to a sharp decline in spodumene prices. On Wednesday, Arcadium announced it is reviewing its Mount Cattlin operations in Western Australia, citing high costs and falling prices of the raw material as reasons for potential production cuts.
The lithium market is currently grappling with an oversupply stemming from rapid production growth that has outpaced demand, particularly as the adoption of electric vehicles has been slower than anticipated. Spot prices for spodumene have dropped to around $940 per metric ton, the lowest level in nearly three years, with Goldman Sachs predicting an average price of $800 over the next year.
This downturn follows job cuts announced by Albemarle, a leading lithium producer, as it paused expansion plans at its lithium hydroxide plant in Western Australia. Analysts suggest that Australia, which supplies nearly half of the world’s lithium, is likely to bear the brunt of upcoming production cuts due to higher operational costs compared to South American brine producers.
With mines in Australia not fully integrated, operators are more vulnerable to price fluctuations. As a result, companies like Liontown Resources and Pilbara Minerals, which have recently begun production or expanded operations, may face tough conditions in the coming quarters.
Mineral Resources, which operates high-cost mines such as Mt Marion and Wodgina, has indicated it will closely monitor the market, acknowledging that current conditions are weaker than previously expected due to reduced demand for electric vehicles in the U.S. and Europe.