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Battery makers help to prop up loss-making lithium mines

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Global lithium surpluses expected to persist through 2027

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Chinese firms keep Zimbabwean mines open despite losses or

thin

profits

By Eric Onstad

LONDON, Dec 10 (Reuters) - Many lithium mines, led by

Chinese operators, are maintaining production of the raw

material needed for electric vehicle (EV) batteries, in defiance

of prices weak enough to trigger mass output cuts - providing a

boon for battery makers.

The continued production raises the prospect of years of

oversupply and of weak prices.

Some battery makers own mines or have injected cash into

operations to keep them operational, company reports show.

Mines were also maintaining production to retain market

share and good relations with governments and because closures

and restarts can lead to technical issues, according to

interviews with miners, consultants and analysts.

So far, around a dozen lithium producers have temporarily

shut loss-making mines, trimmed output or delayed expansions.

Many others are still operating, meaning the global supply

glut of the mineral needed for batteries for stationary storage,

as well as for EVs, is likely to last for several years and keep

prices low, the industry insiders and analysts said.

The lithium hydroxide price has slid nearly 90%

since touching a peak of $85 per kilogram in December 2022,

after soaring by more than sevenfold during the previous 18

months.

Global lithium supply is forecast to rise by 25% this year

and 15% in 2025, UBS said.

"There are some assets in production that shouldn't really

be, but for their own reasons, they're ploughing on," Martin

Jackson, head of battery raw materials at CRU, said.

He estimated about 10% of production is loss-making.

China has some of the highest lithium mine costs, but many

Chinese-owned lithium mines at home and in Australia and Africa

are unlikely to close because they are integrated into

downstream supply chains, analysts and consultants said.

They noted China's government regards its world leading EV

and battery sector as strategic and is keen to keep it thriving

with steady raw material supplies and low costs.

CHINA'S ZIMBABWE MINES

An expected surge in EV sales and a spike in lithium prices

in 2021 and 2022 ago led to an increase in new mines.

After prices fell in response to oversupply and

weaker-than-expected EV sales, investment in lithium mines

continued, and last year jumped by 60%, the International Energy

Agency said.

Some of the investment stemmed from China's quest to ensure

lithium supplies abroad, including Zimbabwe, which has become

the world's fourth biggest supplier of mined lithium in the

space of a few years.

All four operating mines are majority-owned by Chinese

companies but are making scant profit or suffering losses,

according to Cameron Perks, product director of lithium at

consultancy Benchmark Mineral Intelligence.

None of them has shut down despite costs ranging from $600

to $1,000 per metric ton of material sold compared to a price of

$765 per ton, said Perks, who visited mines in the country in

recent weeks.

The price is based on spodumene concentrate containing 6%

lithium (SC6), a semi-processed material resulting from

separating other minerals from lithium ore.

"There's a common understanding that Chinese parent

companies could absorb some costs downstream," he said.

"There's also the political aspect in China, wanting to

secure their supply chains outside of Australia and Canada,

where they've had some pushback."

He said the highest cost mine in Zimbabwe, Arcadia, is owned

by Zhejiang Huayou Cobalt, which also produces

downstream battery cathode materials.

AUSTRALIA MINES GET OUTSIDE SUPPORT

In Australia, where costs are also high, some companies plan

to tough it out with support from battery makers, rejigging mine

plans and offsetting losses in lithium with profitable

production of iron ore, copper or nickel.

Mineral Resources (MinRes) last month said it was

putting its Bald Hill mine under care and maintenance.

However, it also left two other mines producing, although at

lower levels, including Mt. Marion, which has higher costs than

Bald Hill on an SC6 basis due to lower grades, according to Luke

Allum at consultancy Project Blue.

The two other mines are jointly owned so MinRes has to

consult with its partners. Mt. Marion mine is 50% owned by

China's Ganfeng Lithium, which manufactures

batteries as well as being a lithium producer.

"The sweetener for MinRes at Mt. Marion is the mining

services contract from Ganfeng, where they get a little extra

revenue," said Allum.

Australia's Liontown Resources ( LINRF ) has kept its new

Kathleen Valley mine in operation by trimming output during its

ramp-up.

Liontown, which posted an annual net loss after tax of

A$64.9 million, has been supported by South Korean battery maker

LG Energy Solution (LGES), which supplied $250

million in funding in July.

LGES, which got a 10-year extension to its lithium supply

deal from Liontown, has benefited from weak lithium prices, with

an official telling an earnings call in July: "Due to weak metal

prices, the advanced automotive battery division posted an

increase in revenue."