Arcadium to pause some lithium expansion projects in Canada, Argentina amid low prices: CEO

Arcadium Lithium intends to pause current investment in two of its four expansion projects amid low lithium prices and as additional supply has come into the market at a faster rate than expected, CEO Paul Graves said.

The company plans to pause investment in its 40,000 mt spodumene Galaxy project in Canada and is exploring the opportunity to bring in a partner to provide capital for the project. Additionally, Arcadium is revising the sequencing of its combined 25,000 mt lithium carbonate projects at the Salar del Hombre Muerto, in Argentina, and no longer plans to execute the Fenix Phase 1B and Sal de Vida Stage 1 expansion simultaneously as previously announced.

"It's increasingly clear that at current lithium market prices, our industry cannot invest in capacity expansion at the pace announced to date," Graves said during the lithium producers second-quarter earnings call late Aug. 6.

"Arcadium Lithium's expansion projects are forecast to be amongst the lowest cost operations globally when completed, and we remain committed to developing all of them in the coming years. However, the market today is clearly indicating to our industry that accelerating the delivery of additional supply volumes is not what is needed if the market is going to be in balance."

The company has no plans to alter development of Nemaska Lithium, a 32,000 mt integrated spodumene to hydroxide project in Canada, Graves said.

Supply pressure

Much of the supply growth has come in the form of spodumene out of Africa and lepidolite in China, Graves said, adding that much of the investment in these resources is coming from supply chains directly connected to converters or end consumers in China as they seek to become more integrated into upstream resources.

"This is resulting in lower demand growth for unintegrated spodumene, even as end-market demand for lithium chemicals continues to grow," Graves said. "It also reduces the demand for some lithium chemicals as more consumers or fully integrated converters in China are now producing lithium chemicals themselves."

Arcadium continues to view longer-term lithium prices as heavily skewed to the upside from today's levels as there is limited ability for prices to move much further down from current levels on a sustained basis, Graves said. It is his belief that current prices in China are "well below" production cost and significantly below the prices needed to incentivize further investments, he added.

Arcadium said its realized average pricing was $17,200/mt for combined hydroxide and carbonate volumes in Q2.

Platts, part of S&P Global Commodity Insights, assessed lithium carbonate and lithium hydroxide at $12,000/mt and $11,300/mt, respectively, on a CIF North Asia basis Aug. 7. The lithium carbonate assessment is down 20% from the start of 2024 and has fallen 85% since reaching a peak of $78,200/mt in November 2022. Similarly, the lithium hydroxide assessment has fallen 26% since the start of this year and is down 87% compared with a November 2022 peak of $84,700/mt.

"The longer prices stay where they are, the greater the likelihood of production curtailment from high-cost resources, and lower the investments in future supply," Grave said. "We expect that end-market demand growth rates and lithium chemical demand growth rates will return to alignment as the pace of back-integration slows, and this will result in prices increasing towards reinvestment levels at that time."