Rio Tinto bets lithium will retain its battery metal crown
LONDON, June 3 (Reuters) – It’s a tough time to be a lithium producer as the light metal sinks under the weight of excess supply.
Lithium hydroxide prices have collapsed by 90% from their 2022 peak and show no signs of recovery.
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Multiple producers are now operating at zero or negative margins, according to consultancy Wood Mackenzie. Even giants like Albemarle (ALB.N), the world’s largest producer of the battery metal, have been cutting costs and deferring new projects to weather the supply storm.
Rio Tinto (RIO.L),however, is undaunted. The global mining house remains “consistent in its belief in the long-term outlook for lithium”.
The company is putting its money where its mouth is, snapping up U.S.-based producer Arcadium for $6.7 billion and partnering with Chilean state entities on two projects.
It’s a big call, given the current despondency in the market, but Rio believes demand will be strong enough both to absorb the current excess and pull the market into deficit around the turn of the decade.
It’s a bet that lithium will remain the dominant battery metal in a fast-changing landscape.
LOW PRICE, HIGH DEMAND
The weakness in the lithium price results from too much new supply hitting the market at the same time.
Global lithium production grew by over 35% year-on-year in 2024, according to the International Energy Agency (IEA). New mines are still ramping up and Chinese players show little appetite for cutting production.
The supply tsunami, however, masks the strength of lithium demand. The IEA estimates global usage grew by 30% last year, the increase being equivalent to the size of the entire global market in 2018.
The electric vehicle (EV) sector, the biggest user of lithium-ion batteries, is in robust health. Sales of new energy vehicles rose by 25% last year and were up by 29% in the first quarter of this year, according to consultancy Rho Motion.
Lithium use in energy storage systems is growing even faster as global power systems pivot towards cleaner but intermittent energy sources such as solar and wind.
Rio Tinto said it expects demand to grow at a compound annual rate of over 10% through 2040.
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Rio Tinto bets lithium will retain its battery metal crown, source
