Australia is anticipated to continue dominating the global supply of lithium concentrate, which is set to remain growing albeit at a slower pace. And in the short to medium term, so are the headwinds of weak demand and oversupply. 

According to analysts at BMI, a Fitch Solutions company, Australia accounted for 51% of the global lithium mine production in 2022. By 2033, it is forecast to hold a market share of around 30%. 

With new lithium players entering the global market, total supply will continue to increase. However, a significant decline in annual growth rate is forecast in 2025-2026, with a lower pace anticipated after 2029. 

“We expect global lithium production to grow by 16.4% year over year in 2024 to 1.12 million t lithium carbonate equivalent (LCE),” says Olga Savina, senior metals and mining analyst, during a webinar monitored by Kallanish. 

BMI’s estimates include a 19.7% y-o-y increase in 2025 to 1.35m t LCE, followed by a 14.2% rise in 2026 to 1.54m t. By 2027, global supply should increase by 11.5%  to 1.71m t, and another 10% in 2028 to 1.88m t.

In Australia, lithium production is expected at around 500,000 t LCE this year, growing to 600,000 t in 2025, and eventually reaching 800,000 t in 2033. 

Profitability risks

Although the analysts believe that lithium prices will remain low and won’t return to the peaks of 2022 and 2023 for at least five to 10 years, they are still confident that most of the major miners in Australia will remain profitable due to their ability to cut costs. 

However, some face risks due to high production costs, such as Core Lithium’s Finniss project, the analysts suggest. This hard-rock lithium project in Northern Territory entered production last year but is currently paused due to low lithium prices. BMI says the Finniss project has a production cost about six times higher than the famous Greenbushes mine, Australia’s largest lithium mine until recently. According to BMI, the difference in spodumene production costs between the two projects is about $1,100/tonne. 

Production costs at Pilgangoora, now Australia’s largest spodumene operation, are estimated at $400/t. Three major lithium mining projects in Australia – Mt. Marion, Wodgina, and Mt. Cattlinare – are estimated to have similar costs at around $500/t. 

While the analysts did not provide a pricing forecast, the spot price for Australian spodumene concentrate 6% lithium oxide is currently around $1,055/t, down from an average of around $1,118/t last month. In January 2023, prices were at around $7,600/t, and early this year at $900/t. 

The latest estimates from Australia’s chief economist office see spodumene prices increasing slightly to an average of $1,203/t in 2025 and $1,235/t in 2026. Although this forecast shows an increase from the current spot price, it is still very close to Finniss’ production cost, pressuring its profitability and economic feasibility. 

Higher-cost producers in and outside Australia such as Galaxy Resources, Altura Mining (owned by Pilbara Minerals) and Nemaska Lithium may need to curtail production to avoid going bust, the analysts warn.  Galaxy Resources (merged with Orocobre to Allkem) owns the James Bay lithium pegmatite project in Quebec, Canada and the Mt Cattlin mine in Western Australia. Nemaska Lithium, a Canadian mining company, owns the Whabouchi hard-rock lithium project. 

Sector reshape

Geopolitical risks and innovations are reshaping the sector. “Technological advancements are poised to impact supply and demand and are fundamental in gaining a competitive edge for entrants to the cut-throat market,” the analysts add.

BMI suggests that junior miners and technology developers are more likely to be forced to introduce new techniques, such as direct lithium extraction for brine projects, to save costs. The technology can also potentially reduce production times and environmental impact compared with traditional methods. This would provide an upside to lithium supply, and likely affect Australia’s lithium industry – which is not brine-based. 

In addition, they believe industry mergers and acquisitions are more likely to happen “while the industry’s scores of operators will likely face consolidation.”

BMI’s global mine database has 126 companies developing or operating 164 projects. “Out of those 126 companies, only 23 has more than two lithium operations, while 103 only own one lithium project,” notes senior metals and mining analyst, Amelia Haynes. “So the prevalence of junior miners in the sub-sector creates an optimal environment for M&A in the lithium space. Larger miners equipped with the capital and funding to speed up project development are on the lookout for promising lithium assets to meet future demand.” 

Haynes cites the $10.6 billion merger between Allkem and Livent, creating the giant Arcadium Lithium – “a leading global player.”

Currently, Australian lithium concentrate is mainly shipped and processed into compounds elsewhere, primarily in China. However, players with integrated mining and refining activities (upstream and downstream) could enhance their profitability prospects, taking advantage of lower raw materials, transport and energy costs, and value-added products. According to a cost model by McKinsey, in 2030, integrated Australian participants can produce lithium hydroxide at about 52% of the cost for the rest of the world, with the lowest unit cost of production.

BMI analysts anticipate lithium carbonate and lithium hydroxide prices will increase in the 2025-2028 period. Carbonate price is forecast at $20,000/t in 2025, before reaching 27,000/t in 2028. For hydroxide, the estimate is a starting price of $20,500/t next year, reaching $27,500/t in 2028. Currently, lithium carbonate is priced at $15,500/t and lithium hydroxide at $14,000/t. 

Looking forward, the analysts believe that despite the persistent overcapacity, the demand from EV batteries will support a strong lithium consumption  “By 2028, global lithium mine production and demand are projected to reach an equilibrium at about 1.9m t, with demand set to overtake supply thereafter,” BMI concludes.