Australia is on the cusp of a new commodities boom as a lithium exporter, and Chinese investors are well ahead in the race to secure their supply.
As the critical ingredient in next generation battery storage and electric vehicle technologies, global demand for lithium is forecast to grow at a compound rate of 18% in the decade to 2025, according to Macquarie Research.
In 2015, Australia supplied around 36% of the world’s lithium. By 2021, that proportion is forecast to grow to 48% of a much larger global market.
Australian exports of spodumene, the mineral ore containing lithium, have increased 84% in the three years since 2014.
“The increasing demand is a game changer for producers at the higher end of the cost curve in Australia,” explains Patrick Cocquerel, global head of natural resources at Australian bank Westpac.
Cocquerel says that until recently the lithium market was dominated by lower cost products from South America produced in vast salt lakes.
With increased demand and higher prices, exploiting higher quality Australian lithium – secured through open cut mining – has become economic, unleashing new exploration and opening new mines.
The price of processed lithium carbonate in China increased by more than 30% over calendar year 2017. Still, the lithium market is volatile. Speculative investors piled into lithium stocks in 2017 but the expected boom has not arrived, yet.
Shares in several big lithium players were pounded last week on news Chile’s Sociedad Quimica y Minera de Chile, or SQM, one of the world’s biggest producers, may soon receive government permission to more than triple its current level of production.
There is now arguably an oversupply of lithium as miners overproduce at a time global industry leaders are yet to fully develop the battery plants and electric vehicles of the future.
Undeterred, Chinese investors have positioned themselves for the long term in Australia’s lithium industry, not just in mining but in the pre-export processing of spodumene ore.
Australia’s lithium story is part of a rising global race for the commodities needed in next generation technology, comprising not just lithium but also cobalt and nickel.
Chinese companies spent over US$80 billion in 2017 on overseas resources projects, including deals at cobalt mines in the Congo Democratic Republic, home to the world’s largest cobalt reserves.
In securing access to Australia’s lithium, the Chinese are well ahead of investors from other Asian countries such as Japan and South Korea which are also developing lithium-ion battery production.
Westpac’s Patrick Cocquerel points out that unlike Chinese involvement in the iron ore industry, where the raw commodity is simply exported from Australia, Chinese investors are becoming involved in Australia’s value-added lithium supply chain.
Chinese investors are also “pre-buying” their lithium by investing in mines in exchange for offtake deals, where the mines being opened on the back of the deals.
Chinese company Tianqi Lithium has announced an investment of around US$600 million to construct a lithium processing plant in Kwinana, Western Australia.
That plant is currently under construction and when complete will ultimately produce 48,000 tons of battery grade lithium hydroxide each year.
Tianqi is also a shareholder, with US company Talison, in the Greenbushes lithium mine south of Perth, where a US$250 million investment is set to double production.
Last year, Chinese car maker Great Wall paid over US$20 million for a stake in another Australian producer, Pilbara Minerals, becoming the first car maker to secure an off-take agreement.
Japanese auto giant Toyota has followed suit this year, confirming a much larger investment of US$224 million in Orocobre Ltd, an Australian Security Exchange (ASX)-listed lithium producer with interests in Argentina.
Another Chinese company involved in Australia’s lithium industry is Jiangxi Ganfeng Lithium, which has a 25% stake in the Mount Marion mine in Western Australia operated by ASX-listed Mineral Resources.
The fundamentals for lithium demand are compelling. Bloomberg New Energy Finance has forecast that by 2040 more than half of all new car sales and a third of global light duty vehicles will be electric.
China’s electric vehicle industry is already the world’s largest, and Chinese companies are responsible for 25% of the world’s lithium-ion battery supply.
Australia’s recent relationship with China has been built on exporting “old world” commodities in iron ore and coal as part of China’s growth story.
But recent Chinese investments in Australian lithium demonstrate that this close economic relationship is set to continue and thrive in a new era of next generation technologies.
Haseen Ullah
The imposition of Israel on the (Muslim) Arab world by England and France, both of whom were also Colonial powers who controlled a good deal of that region is the cause for the Middle East upheaval
The 1916 Sykes/ Picot Agreement set the stage for the downfall of the Ottoman Empire under which that region had stability. It also drew the modern lines of the Middle East and I believe they were drawn to cause as much instability in that region in order to fascilitate a Jewish state imposed on them without their permission.
Only if that region stays unstable and at each others throats would Israal have a chance to survive. In a united Arab world Israel will not survive.
That agreement also ensured America’s permanent place in the Middle East. I doubt if America is anxious to see stability return to the Middle East as long as they remain hostile to the Jewish state.
Recent articles point to Israel’s aim to cannibalize as much of Syria as she can now that she has "digested" the Golan heights.
Islamic terrorism took off in the 20th century and began mainly in the Middle East. It includes Afghanistan and now is spreading far beyond that region.
That is due to fact that the Arab world cannot dislogde Israel and in lieu are removing every aspect that is non Islamic around Israel.
James Greaves
I think that also includes the Kushan Empire
James Greaves
The Mauryan/Ashokan Empire was one of the most progressive enlightened empires the world has ever seen.
Greek Satrapies
The Ghandaran school of art which includes Hellenism and Indian traditions created the face of the Buddha. The Bamiyan Buddhas stem from that school.
The Gupta Empire considered one of the golden ages of Hinduis included a good part of Afghanistan.
The Mughal Empire especially under Emperor Akbar considered one of the most enlightened and tolerant Emperors in world history included Afghanistan.
Not including Persian influences that is a lot. The instability of the ME is due to Israel.
Michael Bagala I disagree! Afghanistan might be, as you suggest, historically the seat of empires, but those are now past glories. Far from being "unnatural" (or aberrant) to their history, I am prepared to contend that the "instability" is precisely what their history has led up to.
James Greaves
I disagree. Afghanistan "the land of the Afghans" has a rich history of mighty Empires and include Buddhist, Hindu and Muslim kings. It was part of the Mughal Empire which is one of the 3 "gunpowder Empires". The Bamiyan Buddhas attested to her Buddhist past and they were the largest statues from the ancient world.
You cannot judge Afghanistan just by today’s standards because that instability is unnatural to her history.
Dream on, Michael! Afghanistan is a "state" in name only. Instead of an Afghan nationality the country is occupied by warring tribes and warlord fiefdoms with no shared loyalty – none of whom want to submit to the authority of any of the others. As long as the minerals producing potential of this sorry excuse for a nation state remain undeveloped in the midst of unending civil war, Australia need have no worry about this country as a competitor in our minerals export trade.
You want to get a better image for the top of the story. Some lithium cells there, but lots of alkaline and silver-oxide cells too. Ask Getty for your money back.
Afghanistan has vast resources of Lithium plus many other minerals. Afghanistan’s mineral wealth is pegged at 3 Trillion dollars and is easier for Asia’s major powers to access. If China’s silk road were to include Afghanistan it could make this nation a wealthy state and by that solve many of her current problems.
The Australian Government should start playing Chinese wei-qi or ‘gomaku’. Why just a lithium processing plant in W.A.? Why not an electric car factory in the former Holdens in S.A. or Toyota in Victoria?
Ditch the the war rhetoric of the U.S. bandwagon and switch over to the Chinese OBOR bandwagon. Make trade not war!
More realistically, the Chinese are more into chicken, duck and pork – and so MacDonalds or KFC and all the others have to modify their respective bastion offering with what the Chinese Government consistently trumpet as ‘Chinese characteristics’.