IGO Ltd., an Australian mining company, and its Chinese partner Tianqi Lithium have decided to cease operations at one of their lithium hydroxide plants in Western Australia, citing ongoing production issues and a significant drop in lithium prices.

The move comes as both companies grapple with the challenges of a sharply declining lithium market. Prices have plummeted by nearly 90% over the past two years, forcing many producers to curtail operations or delay expansions.

The Kwinana refinery, a joint venture between IGO and Tianqi, has been plagued by design issues and production delays since its inception. The second production line, with a planned capacity of 24,000 metric tons per year, has been repeatedly delayed and is now deemed "not economically viable" by Tianqi.

IGO has already warned of an additional net loss in its first-half results, attributing it to a decline in the value of its Kwinana assets. The company is currently assessing the full extent of the impairment charge.

Tianqi, facing a net loss for 2024, has also halted construction of the second production line at Kwinana. The company cited poor prices and changes to construction plans as contributing factors to a significant impairment.

This decision reflects the broader struggles of the battery metals industry. With demand for electric vehicles cooling and oversupply looming, many companies are facing difficult choices.

Impact on the Market:

The halt in production at Kwinana is expected to have a significant impact on both IGO and Tianqi.

•              IGO: The company is already facing challenges with its nickel operations and is currently undergoing a strategic review. The Kwinana impairment adds to its financial woes.

•              Tianqi: The Chinese company is facing a substantial net loss for 2024 and is now grappling with the consequences of its Australian investment.

The decision to cease operations at Kwinana highlights the increasing pressure on lithium producers to adapt to the changing market dynamics. With prices remaining low and demand uncertain, further production cuts and project delays are expected in the coming months.

Kwinana, a cutting-edge, fully automated lithium hydroxide plant in Australia, commenced production in late 2022. Located near Perth and Greenbushes, its strategic position leverages proximity to feedstock and logistics.

Train 1 is ramping up towards its 24,000-tonne annual capacity. Work is underway on Train 2, with completion expected in late 2024.

Kwinana plays a crucial role in a vertically integrated lithium value chain, sourcing spodumene concentrate from Greenbushes and supplying high-quality lithium hydroxide to global battery manufacturers in South Korea and Europe.

Customers benefit from strong ESG credentials and transparency across the supply chain, from raw materials to the final product.