ASX lithium shares were startled on Thursday after Albemarle Corporation (NYSE: ALB), the world's largest lithium producer, announced significant cuts to its Australian operations.
The company will shut down half of its lithium processing facility in Western Australia and halt construction on further expansions, leading to 300 job losses.
This move comes in response to a prolonged slump in lithium prices, which are down more than 85% from their peak. Currently, the battery metal is priced at CNY 83,500 per tonne.
The spillover has had mixed impacts on the basket of ASX lithium shares today. Here is the spread at the time of writing:
- Pilbara Minerals Ltd (ASX: PLS) shares are up nearly 5%
- Core Lithium Ltd (ASX: CXO) shares are down 1.5%
- IGO Ltd (ASX: IGO) shares are up less than 0.5%
- Liontown Resources Ltd (ASX: LTR) shares are down 2.5%
- Sayona Mining Ltd (ASX: SYA) shares are down 1.6%
- Lake Resources (ASX: LKE) shares have surged over 4%
- Latin Resources Ltd (ASX: LRS) are down 1.7%
- Mineral Resources Ltd (ASX: MIN) shares are down less than 0.5%
Let's take a look at what's unfolded today.
Market conditions create headwinds
The price of spodumene concentrate, a primary source of lithium, has plummeted more than 85% from its 2022 highs.
This sharp decline has pressured many lithium producers and explorers, leading to job losses and operational shutdowns across the sector. ASX lithium shares have borne the brunt of this.
This is despite government support for the sector.
According to The Australian Financial Review, the government had recently announced a $17.6 billion critical minerals production tax incentive to attract processing facilities to Australia.
Albemarle noted this in its decision to size down operations here in Australia.
[The. company] today announced it has launched a comprehensive review of its cost and operating structure, as well as immediate asset actions at its Kemerton lithium processing site in Australia.
The company is taking these steps to proactively respond to ongoing industry headwinds, particularly in the lithium value chain, so it can preserve long-term competitiveness.
The question is, what's next for Albemarle? The company says it plans to focus on ramping up its existing facilities and will explore further expansion only if market conditions improve.
Last year, the company also acquired Western Lithium, which holds exploration tenements in the Pilbara.
The mining giant will maintain a workforce of 460 people at its Kemerton plant and 40 staff in its Perth office. It still intends to begin an exploration program in Australia later this year.
Impact on ASX lithium shares
The overall impact on the ASX lithium basket has been mixed, as shown in the list above. Some stocks are up, and some are down. So there's hardly been a ripple effect.
It's also important to recognise that the market might need some time to digest the impacts fully.
Whilst not an ASX lithium share, Monadelphous Group Ltd (ASX: MND) has been directly impacted by Albemarle's decision.
The engineering company's contract for construction at Albemarle's Kemerton project has been terminated, leading to an estimated $200 million reduction in its current construction work-in-hand.
This news has already caused a more than 5% drop in Monadelphous' share price.
Takeaway
ASX lithium shares continue to show mixed results in 2024. The price of the underlying commodity, in addition to moves such as Albemarle's today, underscores the short-term challenges in the sector.
In my opinion, the market will need a few days to fully digest the magnitude of the decision.
