During a stellar week for ASX 200 lithium shares, the boss of global top five lithium producer Mineral Resources Ltd (ASX: MIN) says Australia needs to have its own battery chemicals industry.
ASX 200 mining billionaire Chris Ellison says Australia needs a "rapid and substantial acceleration of the development of a battery chemicals industry" to fully capitalise on rising global demand for lithium.
As a resource-rich nation, Australia is already the world's biggest lithium producer and exporter. We produced 46% of the global lithium supply in 2021, according to the latest government resources report.
Ellison says Australia should be doing more than simply digging lithium out of the ground.
Almost 80% of global lithium consumption goes into the manufacture of rechargeable batteries. This is largely due to the world's massively expanding uptake of electric vehicles (EVs).
Making batteries involves a refinement process to turn raw lithium into battery chemicals first.
Ellison is asking the question, 'why can't we do that here?'
Image source: Getty Images
The case for a local battery chemicals industry
According to The Australian, China controls about 80% of the world's lithium battery supply chain. It's the world's biggest manufacturer of lithium batteries and electric vehicles.
In a submission to the Federal Government this week, Ellison says:
With demand for battery chemicals set to grow by more than fivefold by 2030, we have a once in a generation opportunity to strengthen the value of our natural resources and create thousands of long-term jobs further down the battery chemical supply chain.
Without the rapid and substantial acceleration of the development of a battery chemicals industry, there is no chance of Australia ever moving past the extraction and early refinement of battery minerals.
$15 billion local manufacturing fund now in play
Ellison's comments are topical given the passage through Parliament this week of the $15 billion National Reconstruction Fund, which incentivises onshore manufacturing in Australia.
Sovereign manufacturing capabilities were a key issue to emerge out of COVID-19.
Recent supply chain issues have contributed significantly to rising inflation.
The Fund has seven priority areas, including renewables and low-emission technologies; and value-adds in the resources sector.
Ellison says it is currently far more expensive to set up battery processing operations in Australia compared to China.
He's currently building a lithium hydroxide processing plant in Western Australia that is expected to cost US$1.5 billion. He reckons the same facility would cost US$600 million to build in China.
Ellison said:
While some downstream investments in battery chemical conversion have been made in Australia, each of these projects has been plagued by delays, technical challenges and significant capital cost blowouts.
The investments to date have barely scratched the surface of Australia's battery chemical production potential.
What's the latest with ASX 200 lithium shares?
What a week in this particular space. ASX 200 lithium shares flew this week after US lithium giant, Albemarle (NYSE: ALB) made a play for local start-up Liontown Resources Ltd (ASX: LTR).
Liontown shares rose by a staggering 68.5%, with large gains of 15% to 20% for Allkem Ltd (ASX: AKE), Pilbara Minerals Ltd (ASX: PLS), and Core Lithium Ltd (ASX: CXO) shares, too.
Mineral Resources and Albemarle are partners in a lithium mine in Western Australia.
