Arcadium Lithium and Albemarle rethink production amid falling prices

Arcadium Lithium and Albemarle, with operations in Argentina and Chile, are restructuring their expansion plans and cutting costs in light of declining lithium prices, even though demand is rising due to the energy transition.

Arcadium will no longer carry out the first expansion phase of Fenix and the start-up of Sal de Vida, both in Catamarca province, in parallel. The projects will advance sequentially to evaluate costs, the Q2 results report said.

Meanwhile, US company Albemarle still plans a production increase in Chile's Salar de Atacama but suspend an expansion in Australia and reduce capex by US$300-400 million year-on-year to maintain cash flow.

In the last month and a half, the price of 99.2% grade lithium carbonate fell from US$11,707/t to US$10,206/t and of battery-grade lithium hydroxide from US$11,429/t to US$10,532/t, according to the Shanghai Metals Exchange.

The prices reflect an 80% drop compared to early 2023.

The reduction is explained by higher supply, battery overcapacity in China and falling electric vehicle sales, especially in Europe, due to import tariffs.

“With spot lithium prices in China plummeting to a three-year low, dragging down Asian markets, integrated producers are facing mounting cost pressures, while non-integrated producers may find themselves operating at a loss,” commodity market agency FastMarket said in a statement.

"At this price point, we are well into the cost curve, compelling more significant production cuts in the coming months to rebalance the market and mitigate further losses," it added.

Rising environmental awareness also contributes to rising price pressure as recycling efforts intensify.

The global lithium-ion battery recycling market is expected to grow at an annual rate of 17% between 2024 and 2032, from US$16.2 billion to US$56.9bn, according to a report by Markets and Markets.

ARCADIUM

The company, resulting from a merger between US firm Livent and Australia's Allkem, plans to save US$125mn annually from 2027 and will reduce expenses by US$500mn in the next 24 months.

In addition, it is re-evaluating investments in Fenix and Sal de Vida, although the company maintains plans to form a complex with both projects in the Salar del Hombre Muerto, given they are only 10km apart.

"The market is clearly indicating that the industry does not need to add supply at the same pace as previously expected," company president Paul Graves said in a press release.

In the second quarter, the miner completed an expansion at Fenix to increase production to 33,000t/y of lithium carbonate equivalent (LCE), including lithium chloride. Last year, it produced 18,000t LCE and 5,000t lithium chloride.

Arcadium also completed an expansion at Olaroz in Jujuy province that will increase output from 17,758t/y LCE to 40,000t/y, although full capacity will be achieved only next year because the evaporation ponds require a minimum of 12 months to achieve production.

ALBEMARLE

The company continues to review its finances and operational structure, as the metal transaction “is well below the incentive price for new projects,” the Q2 report said.

Although higher volumes were sold, net sales reached US$1.43bn, down from US$2.37bn a year ago. It reported a net loss of US$188mn, compared to a net profit of US$650mn.

Albemarle is seeking to improve the situation with higher sales boosted by an expansion of its La Negra plant in Chile's Antofagasta region, where current capacity is 94,000t/y LCE, including 4,500t/y lithium chloride.

Development agency Corfo, which manages Albemarle's operating contract, authorized the company to produce an additional 240,000t of lithium metal equivalent (LME) during the contract period, which ends in 2043. The figure adds to the 262,132t LME Corfo authorized in 2016.

But the recent authorization is contingent on a commitment to a sustainable technology, such as direct lithium extraction, to either replace or combine with the evaporation method that is being used across 83 wells in the Salar de Atacama.

Operations may continue beyond the current contract period under a public-private partnership, as outlined in the national lithium strategy.