Chinese lithium miner Tianqi, one of the world’s top producers of the white metal, has shelved plans to complete a A$300 million ($205m) second phase expansion at the world’s largest lithium hydroxide plant as an oversupply of the commodity continues to drive down prices.
The company, which officially opened up the first stage of its Kwinana plant on Tuesday, said the decision was made to focus on completing the facility’s initial phase rather than as a response to market conditions.
“We just had so many people on site and so much construction activity happening that we really wanted to just focus on getting stage one complete (…) That happened at the same time as the market has softened a little,” Tianqi Australia’s general manager, Phil Thick, said.
At full production, Kwinana is expected to produce 48,000 tonnes of battery-grade lithium hydroxide a year, treating spodumene concentrate coming from Tianqi’s half-owned Greenbushes mine, south-east of Perth.
The facility is a major step for Western Australia which has struggled to attract and develop secondary processing opportunities for the billions of dollars of minerals mined across the state.
Lithium, one of the key ingredient for batteries that power electric vehicles (EVs) and high tech devices, was Western Australia’s sixth largest mine production in 2018.
News of the delay comes after Tianqi and Albemarle Corp (NYSE: ALB), the world’s No. 1 lithium miner, last month postponed a planned expansion of their Greenbushes lithium project.
The US-based lithium giant also revised a deal to buy into Australia’s Mineral Resources’ (ASX: MIN) Wodgina lithium mine and said it would delay building 75,000 tonnes of processing capacity at Kemerton, also in Australia. Related: SoftBank Urges WeWork To Pause IPO Plans
Chile’s Chemical and Mining Society (SQM), the world’s second largest lithium producer, has also shown the impact of weak prices. Last month, it posted a 47.5% drop in profit to $70.2 million during the second quarter of this year, from $133.9 million in 2018.
Prices for lithium carbonate, the most common type used in EV batteries, doubled over 2016 and 2017. Since then, they have fallen by more than 40% over the past year, to around $9.25 per kg at the end of July.
The sharp drop has been driven by an “avalanche” of new supply and China’s changes to its subsidies to EV makers, commodity research group CRU said in August.
Australian producers, which account for nearly half of the world’s mined lithium supply, have said they don’t expect a significant market improvement through year-end.
More Top Reads From Safehaven.com: