EV makers urged to become lithium project partners

A big lithium producer in Australia, the world’s top supplier, is urging electric car manufacturers and battery makers to become its partners in new refinery projects, arguing their direct financial backing is vital to avoid shortfalls of a material crucial to the clean energy transition.

Pilbara Minerals is seizing on a rush by car makers to secure future supplies of battery materials by seeking new deals with customers to jointly develop refineries, CEO Dale Henderson said in an interview.

“There’s certainly a level of desperation from some groups” who are end users of lithium and seeking more access to output, he said. “If you believe the supply demand outlook, there’s going to be a shortage, and the car companies who haven’t secured the supply chain are going to have a problem.”

Lithium demand is forecast to almost triple by mid-decade from 2021’s level, BloombergNEF reported in July. Prices hit a record in China last month on rising consumption, with car makers including BMW and General Motors among companies adding new supply agreements in recent weeks.

Pilbara Minerals, which has a market valuation of about $8.5bn (roughly R150.7bn), is planning a big expansion of its mine in Western Australia in the next two years that will nearly double output of lithium-bearing raw materials. The company aims to leverage current strong demand to move away from long-term supply deals and win more pricing power.

Previously, lithium miners rushed to strike agreements with refiners, battery companies and car manufacturers to show investors the strength of the market for their product, and to help secure funding to develop projects. With analysts now predicting prices will stay elevated after more than doubling this year, according to a big index, producers are in a stronger position to demand better deals.

“Two years ago, no-one wanted to be in lithium, and the phone would not ring,” Henderson said. “Now, the phone won’t stop ringing.”

Another Australian lithium miner, Liontown Resources, demonstrated the sector’s growing bargaining power in June, when it sealed a deal with Ford Motor. The supply pact was notable because it included a A$300m (roughly R3.5bn) loan from the car giant at a comparatively low interest rate of 1.5% above the bank bill swap rate, a common benchmark in Australia.

Whereas Liontown sought funding for its Kathleen Valley mine project in Western Australia, Pilbara Minerals sees the chance to add to its foothold in downstream chemical processing, a strategy designed to help the producer diversify away from the volatility of raw commodities.

Pilbara Minerals has an 18% stake in a joint venture with South Korea’s POSCO Holdings and expects their plant to begin producing battery-grade lithium hydroxide late next year. The Australian miner is now seeking other similar deals, potentially with car makers, Henderson said in Perth last week.

China-based Tianqi Lithium has begun producing lithium hydroxide at a refinery in Western Australia — the first new big hub outside its home country — and Albemarle is developing a separate operation nearby. It’s unlikely Pilbara would add a similar facility in Australia, though, it’s in the early stages of planning a refinery that would turn lithium-bearing ore — known as spodumene — into an intermediary salt product.

That would be easier to produce than lithium hydroxide, and also more valuable and cheaper to transport than spodumene concentrate, Henderson said.

Pilbara’s mine expansion will add an extra 400,000 tonnes a year of hard rock lithium ore — which equates to about 50,000 tonnes of battery grade lithium — in the next two years, Henderson said. Last year, Australia exported 247,000 tonnes of lithium or about 50% of global supply.

Bloomberg