Australia is the only country that mines the crucial battery ingredient and shipss it almost exclusively to China. Both the government and businesses are betting that they can change this.
The Pilbara Minerals Lithium mine in Western Australia.
This article is for you
By Natasha Frost
Matthew Abbott Photographs and Videos
Reporting from Western Australia's Pilbara region
May 23, 2023
In rural Western Australia's Pilbara Minerals, a vast processing plant rises over the red dirt. Its pipes tremble as it moves tons of a slurry of lithium ore.
The plant converts the ore of a nearby quarry into spodumene. This powder is greenish-crystalline and contains about 6 percent Lithium. It sells at about $5,700 per ton. The spodumene then gets shipped to China where it's further refined and used for batteries in products like electric cars and cellphones.
Australia produces almost all the lithium in the world, which is then sold to China. The Australian government now wants to end the global dependence on China in processing the minerals that are driving the green Revolution.
Pilbara Minerals is the largest independent lithium miner in Australia. It is exploring a model to produce battery chemicals closer to the mines and sell them to allies such as the United States or South Korea.
It is a daunting task to get such an industry off the ground. China has a huge head start with its years of experience, hundreds of lithium refinery plants and steadily tightening control over the world's batteries-making facilities. Analysts said that Australia's stricter workplace standards would also make it more difficult to compete with China in terms of price.
Marina Zhang, researcher at the Australia China Relations Institute of the University of Technology Sydney, said that consumers will use their feet to vote and will purchase electric vehicles or solar panels for home based on cost.
Pilbara Minerals and the Australian tech firm Calix are working on a project that will refine spodumene into a lithium-phosphate salt, a crucial step to prepare the material for batteries. By the end of this year, the companies will make a decision on whether or not to invest 70 million Australian dollars (or around $47million) to build a demo plant.
Dale Henderson of Pilbara Minerals and others have argued that reprocessing lithium in-house would create jobs, reduce shipping costs (94 percent of spodumene shipped is thrown away as waste) and ensure supply chains of battery chemicals amidst rising geopolitical tensions.
Refining Lithium would also enable Australia to tap into Inflation Reduction Act (the Biden administration policy implemented last year). The law is designed to reduce China's dominance in green energy by providing loans or subsidies to countries like Australia that have free-trade agreements with the United States.
The Group of 7 summit held last weekend saw President Biden of the United States and Australia's Prime Minister Anthony Albanese announce joint projects to improve the supply chain of 'critical minerals,' which are used in the production of clean energy.
The Australian government has invested hundreds of millions in supporting the lithium refinery industry. They bet that customers would prefer to buy lithium from a country with a stronger rule of law and a more environmentally-friendly approach.
Allison Britt is a director of Geoscience Australia.
In a report published last year, the Australian government predicted that by 2027 20 percent of the global lithium refining would be done in Australia. This was up from 1 percent. Some top officials have even set loftier goals.
In a speech, Mr. Albanese said, 'I'd like to ensure that we use lithium, nickel, and other products we have here to make batteries.' "That's part our vision to protect our national economy moving forward."
Australia will have to take significant steps to catch up to China's refinery.
Australia currently has only two lithium hydroxide production facilities, which are used to manufacture cathodes. A third is under construction. Construction delays and cost overruns have caused major delays in all three facilities.
Albemarle, the American chemical company, and Mineral Resources, an Australian miner, are expanding the largest facility with the aim of making it 'one the world's biggest lithium production facilities', according to a Albemarle statement. It produced its first lithium hydroxide battery grade last year, but it was more than a full year behind schedule.
Cost is a major challenge for Australia. John Stover, portfolio manager at Tribeca Investment Partners and citing UBS data, stated that the investment required to set up a lithium-hydroxide plant in Australia is about two-and a half times greater than in China.
He said that Australia had traditionally shipped ore unprocessed to other countries for processing. This change of mind-set is, I believe, going to be difficult.
Chris Ellison, owner of Mineral Resources, says the government should make it easier for foreign firms to invest in Australian Lithium Refining by providing incentives such as funding and tax exemptions.
In a February presentation to investors, he stated that the American government was offering grants for them to build in Europe and the U.S., as well as in places like Vietnam. We need the Australian Government to get on board with this.
Australia's government must also consider geopolitical issues. Corey Lee Bell of the Australia-China Relations Institute of the University of Technology Sydney said that lithium is crucial to Australia's relationship with China.
Dr. Bell stated, "If we were cut off that supply, it would be an extremely, very serious issue."
Australia has suggested that it may be comfortable with this.
Madeleine King said in a statement last month that Australia had a role to play to push back against 'concentration of critical mineral industries in China', which led to 'fragility', 'volatility' and 'unreliability'. The government has indicated that it may limit foreign ownership of key mineral resources.
In 2020, the previously cordial relationship between Australia and China changed after Scott Morrison ordered an investigation into the origins the coronavirus epidemic. China blocked imports of coal and wine from Australia. Australia escalated this dispute at the World Trade Organization and pulled the state of Victoria out of China's Belt and Road Initiative.
In recent months, there have been signs that tensions are easing. China announced last weekend that it will lift its suspension on Australian timber imports following the lifting of an unofficial embargo against Australian coal.
The relationship is volatile. Australia needs to have more say in the future of its resources. This is what Ross Gregory, an advisor at New Electric Partners said.
Joe Lowry is the founder of Global Lithium, an advisory firm. He said that despite the barriers, Australia has the opportunity to exert influence further down the chain of supply.
Lowry stated that the person with the rock would win. "And Australia has the rock."