Rio Tinto, the mining giant, is no longer enough to be one of the leaders in copper, aluminum and iron ore. The Anglo-Australian firm aspires to become a benchmark in the so-called white gold market, with the aim of including in its portfolio the largest amount of critical materials related to the sustainable economy. A couple of weeks ago he took out his wallet and acquired, for 6.2 billion euros, the American company Arcadium Lithium, one of the largest lithium producers in the world. The move has been strategic. The market is at a critical moment: it suffers from a global oversupply and sales of electric vehicles, which require this metal to power their rechargeable batteries, have stagnated, especially in Europe and North America. The combined effect of these two factors has caused a drop of 87% in the price of the raw material from its maximum in October 2022, putting several companies in the sector in trouble. In the midst of this turbulence, however, some have been able to take advantage of the opportunity. With this purchase, Rio Tinto has achieved a place in the select club of mining companies that dominate the world market (almost 80% of production). Among them, the American Albemarle, the largest extractor of the raw material with almost a third of the production, the Chilean SQM, the Australian Pilbara Minerals and Mineral Resources, the Chinese Jiangxi Ganfeng Lithium and Tianqi Lithium. Their expectations are encouraging: Rio Tinto expects that, in the next decade, the demand for this material will increase as electric vehicles become the protagonists of roads worldwide. The automotive industry is almost completely absorbing production: 60% of lithium demand – while the rest goes to storage systems, consumer electronics and other sectors -, 30% of cobalt and 10% of Nickel is used in batteries for electric cars. In comparison, in 2015, these proportions were 15%, 10% and 2%, respectively. It was this hunger for lithium that fueled the spirit of various companies that embraced new projects or increased existing operations, encouraged by high prices. . “Since 2022, the market has gone from a deficit to a significant surplus,” explains Cameron Hughes, battery markets analyst at CRU Group. In just two years, the amount of lithium available on the market has grown impressively, doubling from approximately 700 kilotonnes of lithium carbonate equivalent (kt LCE) in 2022 to an estimated 1.4 million tonnes (mt LCE) in 2024. Extraction has increased significantly from both hard rock and brine sources. The first especially in countries like Australia, where a significant investment has been made, while the second has occurred in the so-called Lithium Triangle, between Argentina, Bolivia and Chile. Two years ago, experts wondered if there would be enough lithium to all the electric cars the world required. Today, however, the market has been saturated with this material. “The situation will lead to an increase in mergers and acquisitions in the sector,” says Adam Megginson, an analyst at Benchmark Mineral Intelligence, an expert consultancy in the supply chain of lithium-ion batteries for electric vehicles. “Companies with stronger balance sheets look to acquire rivals at attractively low valuations.” In fact, Arcadium Lithium is the result of the Australian Allkem and the American Livent, which merged in early 2024. “Margins and profitability have been greatly reduced, and some companies have been entering losses,” explains Thomas Chandler, expert analyst in critical metals at SFA (Oxford). Some of the smaller firms have been forced to stop mining to reduce costs, while others continue to operate in the hope of a rapid price recovery. The lithium carbonate market has experienced significant fluctuations in recent years. In March 2018, according to Fastmarkets, the price reached a level of 20 dollars (18.51 euros, at the current exchange rate) per kilogram. However, the value fell sharply in 2020, hitting a low of $6.75 in the fourth quarter. At the end of 2022, the price skyrocketed again, reaching an all-time high of $81 per kilogram. Currently, in October 2024, the price of lithium carbonate is trading at $10.50 per kilogram. It was the high prices of two years ago that fueled new projects and expansions in operations, and the consequence is that the supply has multiplied by two. What surprised the market was how quickly China managed to ramp up supply of its new lepidolite mines (a lithium-rich mineral), while also increasing its processing capacity using minerals imported from central Africa. “This wave flooded the market,” says William Adams, head of Base Metals Research at Fastmarkets.
Less subsidies
Meanwhile, in Germany and Norway, key players in the demand for electric vehicles in Europe, subsidies for the purchase of plug-in units were reduced, causing a slowdown in market growth. This means that, although sales remain high, the increase in the number of electric vehicles sold is no longer as rapid as before. The same has happened in the United States and China, where in recent years they experienced double or even triple-digit rebounds, but this last year they have fallen by 30%. “Growth remains strong, but not as robust as in previous years and as the market expected,” emphasizes the Fastmarkets expert. Companies had planned production that later did not match demand, resulting in excess supply. “Cutting production is the only thing that will drive prices up in the short term,” says Megginson, of Benchmark Mineral Intelligence. However, these adjustments will only become visible in prices from 2026, he adds. Several reductions in extraction have already been recorded this year, says CRU Group's Hughes. “A new wave of closures is expected to balance the scales.” In 2025, this expert estimates that approximately 7% of the global supply will be withdrawn. Benchmark anticipates a lithium shortfall toward the end of the decade as growing demand outstrips industry capacity. However, there is still a considerable way to go before reaching that date.