Australia Set to Control 20% of the World’s Lithium Refining in the Next Five Years

Australian government said in a report that the country is set to grab a fifth of the world’s lithium refining capacity within five years as demand grows rapidly for battery metals. Currently, China produces more than 80% of the world’s lithium hydroxide, a processed form of the white metal. However, several companies are building refineries in Australia that aim to turn locally-mined lithium ore into battery-grade chemicals.

The government’s report suggest that if these plans materialize on time, Australia could have 10% of the lithium refining market by 2024, from a negligible share currently, and 20% by 2027. Still, the government warned that delays and technical issues could derail the timeline.

Currently, Chinese company Tianqi Lithium has opened a refinery in Western Australia, in a joint venture with Australia’s IGO. U.S. based mining major Albemarle is also close to opening a plant nearby, in a joint venture with Mineral Resources Ltd. Both projects have been hampered by technical problems and cost blowouts, however.

Australian groups Wesfarmers Ltd, Mineral Resources and Liontown Resources Ltd. are also planning to open new lithium refineries.

Australia is the biggest producer of lithium in the world, supplying just under half of global demand. Most of the mined lithium is sent to China for it to be refined into battery grade lithium hydroxide.

Australian lithium’s biggest market is still Asia, but demand is growing in Europe and the United States. The Australian government’s report particularly underlined Biden’s Inflation Reduction Act (IRA) as a driver of refining in Australia.  The IRA grants tax credits on EVs, but requires 50% of materials to be produced either domestically or imported from a country with a free trade agreement, which could boost Australia’s lithium industry. South Korean battery maker SK On and Japan’s Prime Planet Energy & Solutions said they planned to increase investment in the country.

Moreover, the government report said lithium was on track to become Australia’s fifth most valuable export commodity. Exports of the battery metal are forecast to reach A$13.8 billion ($8.9 billion) this financial year, a more than tenfold rise over two years.

Most of the growth in export revenue is due to surging prices, which have doubled since the beginning of the year as carmakers around the world scramble to secure enough to meet ambitious EV targets. Lithium ore prices are projected to more than quadruple this year.

Increased output will also drive the sector’s earnings, with Australian lithium production expected to more than double over the next five years. Still, it remains a small export industry next to the three biggest export sectors: iron ore, coal, and LNG together are expected to bring in A$329 billion in revenue this year.

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