New-found U.S. Government interest in rare earths and other metals used in electric cars and emerging technologies could test a unique Chinese/American joint venture producing lithium in Australia.
Albemarle Corporation, which has been a star on the New York Stock Exchange for much of the past five years, has a 49% stake in the world’s biggest hard-rock lithium mine at Greenbushes in Western Australia with China’s Tianqi Lithium holding a 51% stake.
Strong demand for lithium, whether extracted in a conventional mine like that at Greenbushes, or produced from brine lakes in South America, has encouraged Albemarle and Tianqi to invest in expanding their Australian operations, including the construction of facilities to convert lithium ore into products required by battery makers, such as lithium hydroxide and lithium carbonate.
The Lithium Party Is Over For Now
But over the past 12-months the lithium boom which drove the share prices of both companies to record highs has faded, as have the shares of both Albemarle and Tianqi.
In New York, Albermarle shares have fallen from a high of $108 last November to recent trades at $68.01. On the Shenzen stock exchange Tianqi has dropped from a high of 52 yuan at this time last year to recent trades at 25.39 yuan.
A bulldozer and excavator operate in an open pit at Talison Lithium’s Greenbushes mine in Australia. Talison is joint venture of Tianqi Lithium Corp. of China and Albemarle Corp. of the U.S. Photographer: Carla Gottgens/Bloomberg
© 2017 Bloomberg Finance LP
Over-supply and slower-than-expected sales of electric cars, especially in China, has seen the price of lithium carbonate fall by 50% over the past two years from close to $20,000 a ton to $10,000/t.
The next test for Albemarle and Tianqi’s joint venture, which trades as Talison Lithium, could be managing any fall-out from the China v U.S. trade war which is straining diplomatic and business relationships.
An indication that the two companies are keen to develop separately is that while they jointly own the Greenbushes mine their new battery-metal processing facilities are in different locations and will be wholly-owned business units of Albemarle and Tianqi.
Albemarle has also taken steps to become involved as a joint venture partner in another lithium mine, the Wodgina development of an Australian company called Mineral Resources. Albermarle’s $1.15 billion investment in Wodgina was due to be finalized last week but has been extended to later in the year, perhaps not until December, a delay which reflects the weaker lithium market.
While lithium producers are jockeying for position the U.S. Government has stepped up its interest in lithium and other metals considered to be of strategic importance.
Earlier this month the U.S. assistant secretary of state for energy resources, Frank Fannon, launched an international drive to boost the supply of raw materials needed in new-energy technologies, such as lithium, copper and cobalt.
Canada and Australia, with their big mining industries, have joined the U.S. in the process which will focus on “clean” energy technologies such as solar and wind power.
The new-energy minerals drive follows threats by China to embargo the export of rare earths to the U.S. as trade-war retaliation and the publication of a 35 element list of critical minerals used in a wide range of manufacturing processes, with that list including rare earths and lithium.
A wall in the Greenbsuhes mine. The white slash is lithium ore. Photographer: Carla Gottgens/Bloomberg.
© 2017 Bloomberg Finance LP
Fannon, who has previously worked for the big Australian-based resources company, BHP, said that the objective of the international hunt for important minerals was “not about having an adversarial relationship with China”.
Weaponizing Rare Earths And Other Minerals
Whether a confrontation with China can be avoided is an interesting question given that China has already declared that its control of the global rare earth business is a useful weapon in the trade war.
Lithium, while not currently in short supply after a mine development boom, is tipped to become a critical metal if sales of electric vehicle rise as rapidly as forecast.
If that happens then a big lithium business in Australia jointly owned by an American and a Chinese company could find itself in an unwelcome spotlight with Albemarle having to consider its obligations to meet U.S. Government requests and Tianqi complying with Chinese Government requests.
Both Albemarle and Tianqi are undoubtedly hoping that the trade war ends quickly before their Australian relationship is tested.
