Shining a light on lepidolite producers | Hotter Commodities

The current rout in lithium prices is likely to be severely testing the willingness of even the lowest cost of these lepidolite producers in China to keep churning it out.

The key question now is how much longer some Chinese lepidolite producers will be able to bear the negative margins they face at current prices, and whether subsidies will be needed – and forthcoming – to help keep them operational.

There have already been unconfirmed reports that Jianxiawo, a major Chinese lepidolite mine, has taken the decision to halt production.

Jianxiawo, located in Jianxi, is owned by battery maker Contemporary Amperex Technology’s (CATL). Lepidolite is a hard rock that is typically used for lithium carbonate production. The integrated nature of CATL production would therefore provide a natural cost-efficiency benefit for Jianxiawo, which makes talk of its closure even more noteworthy.

If CATL’s mine, which was reported to have shut during the Lunar New Year holiday, remains closed afterwards, then it provides a very clear signal that lithium prices are at a level that is starting to bite no matter what kind of producer you are.

Lepidolite production yet to take off

US lithium producer Albemarle is among many others scratching their heads as to why more lepidolite production hasn’t yet been taken offline, given costs of production.

The company recently estimated that about 200,000 tonnes of global lithium carbonate equivalent (LCE) capacity has been closed, with lepidolite accounting for one-third to half of this amount. This includes both lower-grade integrated production as well as non-integrated production, Albemarle said.

“Our maths tells us it should be coming offline,” Albermarle president of energy storage Eric Norris told analysts on the company’s earnings call last week.

Sitting at the top end of the cost curve, lepidolite production was more than economically justified when prices were around five times higher just a year ago.

Yet as lithium carbonate prices have continued to fall, a large portion of lepidolite capacity in China is estimated to be under water at current levels.

Fastmarkets assessed lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea at $14.00-14.50 per kg on Tuesday February 21, a more than 79% decline from $68.00-72.00 per kg a year ago.

It hasn’t deterred the recent pace of growth in lepidolite in China, which is quite astounding.

According to Fastmarkets, Chinese production of lepidolite has more than doubled in the past two years, making it the largest source of mined lithium by resource type in the country last year. In 2023, mined lepidolite production exceeded brines output at 117,600 tonnes, followed by brines at 114,500 tonnes and spodumene at 31,000 tonnes.

Growth in Chinese lepidolite and brines production to come

Fastmarkets analyst Jordan Roberts estimates that Chinese lepidolite and brines production will both grow to more or less similar levels of just over 143,000 tonnes this year, while Chinese spodumene production will reach around 64,500 tonnes.

But from 2025 onwards, Roberts forecasts that lepidolite output in China will pick up pace and exceed Chinese production from brines, reaching around 319,300 tonnes by 2030 compared to 233,500 tonnes for brines and 212,000 tonnes for spodumene.

That’s a massive 443% increase in Chinese LCE production from lepidolite this decade.

Learn more about Fastmarkets lithium long-term forecast and get long-term clarity and market intelligence in the critical lithium market. Learn more.

It makes sense that China is keen to drive its lepidolite production higher – the trend in the country is towards carbonate for lithium-iron-phosphate batteries in electric vehicles (EV). But how far the country’s government is willing to go to support inefficient producers remains to be seen.

The Chinese government has often stepped in over the years to provide state support to industries that it considers strategic, including natural resources like aluminium, iron ore and steel. It’s clear that EVs and the batteries they contain are strategic; it would follow that lithium would fall into that category too.

Chinese state assistance typically comes in multiple forms, including various financial, energy and input cost subsidies, trade measures, VAT rebates, as well as the purchasing and stockpiling of minerals for the national stockpile.

Some of these measures may be already in place, explaining the continued production by many of China’s lepidolite producers. But if subsidies are not forthcoming, then many more lepidolite mines are likely to be shutting until the current pricing trough turns.

In Hotter Commodities, special correspondent Andrea Hotter covers some of the biggest stories impacting the natural resources sector. Sign up today to receive Andrea’s content as it is published.