keywords :
Higher labour and supply costs will slow
but not stop expansion in lithium mining, according to the chief of the world’s
largest producer of the key ingredient in rechargeable batteries.
Labor tightness in Western Australia has
caused a three-month delay at Albemarle’s Kemerton II expansion. The miner has
to pay rates that more than double the level before the pandemic to retain
workers there, while dealing with higher electricity prices in North America
and Europe. Freight rates have also increased 30% to 40% globally.
Producers are starting to ramp up amid
signs the market is recovering from a glut, with the lithium supply tightening
and prices surging. Global demand is projected to rise as much as five fold as
a shift to low-carbon energy sources fuels sales of electric vehicles.
Meanwhile, Covid-triggered shortages in materials have driven up costs across
industries, with US inflation exceeding forecasts in the last four months.
“I don’t think they really stop capacity,”
Kent Masters, Albemarle’s CEO, said in an interview Thursday. “In the near
term, they slow it down, especially if you plan to build plants in Western
Australia.” Higher cost of shipping and power also won’t affect capacity, he
added.
Masters expects the “extraordinary cost
pressure” in labor, energy and freight to come back down after supply-chain
issues are solved, possibly “in a year’s time post Covid.”
A global index of lithium prices has jumped
more than 80% this year, rebounding from a decline that had started in
mid-2018.
BloombergNEF expects the supply of lithium
hydroxide, or battery-grade lithium, to be tight this year and prices to rise
along with battery consumption. It also expects lithium demand to grow
five-fold by 2030 from this year’s levels.
For Albemarle, Western Australia is a
unique market where capital-intensive projects have been difficult to process.
With Covid-related lockdowns, workers there are in even higher demand as mining
companies can’t transfer people from other regions and they will have to offer
higher wages to attract more workers.
“We’re fighting to keep the resources we
have,” Masters said about retaining the workforce in the Australian state. “And
we have to pay significant rates to keep those resources. That’s why the delay
at Kemerton II.”
Shares of the Charlotte, North
Carolina-based company rose 1.3% to $221.545 at 9:36 a.m. in New York trading.