McKinsey analysts said nearly 66 per cent of Australian lithium exports would still be spodumene concentrate in 2030, based on the industry’s stated plans for building lithium hydroxide processing capacity on Australian soil.
But if all spodumene concentrate production were converted to lithium hydroxide before being exported, Australia could unlock extra annual revenues worth between $4.8 billion and $9.6 billion, said a report titled Australia’s Potential in the Lithium Market.
“The lithium hydroxide market may generate up to $10 billion per year in additional revenue for market participants by 2030 with the potential to create jobs, diversify Australia’s raw materials industry, and support Australia’s push toward green energy,” it said.
“If Australia decides to convert all of its spodumene to lithium hydroxide, nearly 4000 additional workers will be required to operate Western Australian plants by 2030.
”Australia has the skills, capital, and resources to secure that opportunity – if it can marshal those assets efficiently.
“Refining lithium will therefore require disciplined coordination and collaborative innovation – and in a short timeframe, before the opportunity is lost.”
IGO Limited and Tianqi already operate a lithium hydroxide processing plant at Kwinana on Perth’s southern fringe, while Albemarle has two processing trains making lithium hydroxide at Kemerton near Bunbury.
Albemarle has this year committed to doubling its Kemerton lithium hydroxide capacity, while Wesfarmers is also building a lithium hydroxide plant at Kwinana in partnership with Sociedad Quimica Y Minera (SQM) of Chile.
Leading knowledge centre
Those projects will mean close to 14 per cent of global lithium hydroxide supply in 2030 will be made within 150 kilometres of Perth, according to McKinsey’s numbers.
“That would be a meaningful concentration of human capital, which the Australian industry might capitalise on to develop a leading knowledge centre for lithium hydroxide,” the report said.
“That step could attract investment, which would in turn generate further knowledge in the space.”
Other companies like Mineral Resources have expressed interest in building lithium hydroxide processing plants in Australia to serve their mines, but have lamented the higher cost of construction here.
Mineral Resources has instead chosen to buy stakes in two Chinese lithium hydroxide plants.
Pilbara Minerals is building a lithium hydroxide plant in South Korea with its partner POSCO in the belief the project will cost 40 per cent less in the Asian nation.
While construction costs are higher, McKinsey believes Australian lithium hydroxide plants can be the world’s lowest cost producers if they are integrated with a mine nearby, as the cost of transporting the spodumene long distances would be nullified.
“Our modelling suggests that Australia could produce lithium hydroxide at approximately $6600 per tonne of LCE (lithium carbonate equivalent) assuming integration with lithium mining, compared with $10,400 per tonne of LCE for China,” said the report.
“Indeed, South Korea and Canada, the closest countries to Australia from a cost perspective, still have costs approximately 24 to 51 per cent higher than Australia’s. In addition, Australian plants would have the strategic advantage of a secure raw materials supply.
“Our analysis also suggests that existing Australian lithium hydroxide refiners could achieve internal rates of return (IRRs) of about 29 to 36 percent.”
McKinsey expects lithium hydroxide will overtake lithium carbonate as the most consumed form of the metal between 2026 and 2030.
Demand for lithium carbonate – the traditional form of lithium used in the batteries that power calculators and cellphones – is projected to grow by about 2.65 times between 2022 and 2030.
Demand for Lithium hydroxide – a chemical that allows greater energy storage and is preferred for electric vehicle batteries – will grow more than eight-fold over the same period, according to McKinsey’s analysis.
McKinsey predicts global demand for refined lithium, a term that includes carbonate and hydroxide, will reach 3.06 million tonnes in 2030. That forecast is more conservative than some lithium miners have predicted.
US lithium giant Albemarle predicted in January that total refined lithium demand would reach 3.7 million tonnes by 2030.
Albemarle’s January prediction marked the third year in a row that the company had upgraded its 2030 lithium demand forecast.
Albemarle produced more lithium carbonate than lithium hydroxide in 2022, but expects hydroxide volumes to overtake carbonate around 2024, and by 2027 it will be producing almost twice as much lithium hydroxide as lithium carbonate.