The spark plug of the world's electric cars

Left: An open pit mine at a Talison Lithium site in Western Australia's Greenbushes. Australia is the world's largest supplier of lithium, with roughly half of the global supply coming from the resource-rich Western Australia. Above: A parking space
An open pit mine at a Talison Lithium site in Western Australia's Greenbushes. Australia is the world's largest supplier of lithium, with roughly half of the global supply coming from the resource-rich Western Australia. PHOTOS: BLOOMBERG, REUTERS
Left: An open pit mine at a Talison Lithium site in Western Australia's Greenbushes. Australia is the world's largest supplier of lithium, with roughly half of the global supply coming from the resource-rich Western Australia. Above: A parking space
A parking space for electric cars in a carpark in Hong Kong. China accounted for about 40 per cent of global electric-car sales in 2016.PHOTOS: BLOOMBERG, REUTERS
Left: An open pit mine at a Talison Lithium site in Western Australia's Greenbushes. Australia is the world's largest supplier of lithium, with roughly half of the global supply coming from the resource-rich Western Australia. Above: A parking space
Batteries for electric vehicles manufactured at a factory in Dongguan, China. The country dominates much of the battery supply chain.PHOTOS: BLOOMBERG, REUTERS

Western Australia's fortunes looking up as it supplies lithium needed by these vehicles

A vast stretch of remote territory in Western Australia has become the epicentre of the world's electric car and battery storage boom.

The area, once famous for sourcing the iron ore that supplied China's construction boom, is now providing the lithium required for the world's so-called energy revolution.

Australia is the world's largest supplier of lithium, with roughly half of the global supply coming from a growing number of mines scattered across the resource-rich state of Western Australia.

The amount is due to increase in the coming years as several large-scale projects start extractions.

An expert on mining economics, Professor Allan Trench of the University of Western Australia Business School, said lithium extraction in the region has had "exceptionally fast growth". He told The Straits Times that the explorations and discoveries are likely to continue.

"Nobody has really gone out looking for these (lithium deposits) seriously before," he said. "There are rapidly expanding massive discoveries in Western Australia. There has never been the strong stimulus to go out and look for it before."

A mine at Mount Holland, a venture about 450km east of Perth run by Kidman Resources, is believed to have one of the biggest deposits of lithium in the world.

Describing the local boom, Kidman's managing director, Mr Martin Donohue, told Fairfax Media in October: "This is a once-in-a-generational shift in the natural resources that are going to underpin what happens in this electric vehicle market."

Australia's reserves of lithium are the fourth largest in the world, behind Chile, China and Argentina. But it is the largest producer, accounting for some 45 per cent of supply, partly as miners are familiar with the requirements for extracting in Australia's west.

The boom has boosted the area's fortunes, with exports from Western Australia jumping six times since the start of last year and local companies skyrocketing in value. Other minerals required for electric cars and battery storage, such as cobalt, graphite and nickel, are also in strong demand.

In Kwinana, just south of Perth's city centre, China's Tianqi Lithium has embarked on a A$700 million (S$730 million) expansion of a lithium processing plant that will become the largest in the world. By next year, the plant is due to process and refine about 24,000 tonnes of battery-grade lithium hydroxide a year.

The boom has been welcomed by local residents, particularly in remote areas.

Commenting on a new A$130 million lithium project by Altura Mining early last year, the mayor of Port Hedland in the Pilbara region, Mr Camilo Blanco, said it would deliver a boost to local employment. "Any project that is starting up in the Pilbara is going to benefit Port Hedland to diversify our economy," he told The West Australian.

So far, it has been smaller miners who have reaped the benefits of the battery boom. Shares in Perth-based Galaxy Resources, for instance, have doubled since last September. The most recent leap followed news last November that it had secured a series of sales contracts across Asia for the next five years.

SIGNIFICANT SHIFT

This is a once-in-a-generational shift in the natural resources that are going to underpin what happens in this electric vehicle market.

MR MARTIN DONOHUE, Kidman Resources' managing director, on the boom in lithium mining.

Another firm, Pilbara Minerals, has seen its share price go from about four Australian cents in 2015 to about A$1.20 now.

But mining giants have shown increasing interest. Australia's iron ore heavyweight, Fortescue Metals Group, confirmed last October that it would start exploring for lithium in the Pilbara region.

As with the iron ore boom, much of Australia's resources will help to fuel growing demand from China, which accounted for about 40 per cent of global electric-car sales in 2016.

Analysts have expressed mixed views about the long-term future of the sector. Some have warned about the risk of a global oversupply and the possibility that car manufacturers will not stick to their commitment to invest in electric vehicles.

Prof Trench said he believed prices will level out but strong demand was unlikely to end in the foreseeable future. "There may be a couple of years of stunning prices and then they may correct to levels where everyone in the industry is still making good money," he said.

 

There has also been concern from the federal government about the need to try to encourage Australia to not merely dig up resources, but also assist in processing and manufacturing. This has been a perennial issue for Australia, which became known as "China's quarry" during the recent mining boom.

Commentators have been critical of the failure by Australian governments to save sufficient funds from its booms to assist during the ensuing busts. Despite being at the epicentre of the recent boom, Western Australia has ended up in heavy debt and has one of the country's worst-performing economies.

The chief economist for the Department of Industry, Innovation and Science, Mr Mark Cully, said Australia was well-positioned to capitalise on the battery boom but should look to expand beyond merely mining and selling.

"It is not clear yet how far Australia can progress beyond mining and into other parts of the battery supply chain, which are dominated by China," he said last June.

"Despite this, the undeveloped state of the supply chain may result in opportunities emerging that are not yet apparent."

A version of this article appeared in the print edition of The Straits Times on January 03, 2018, with the headline 'The spark plug of the world's electric cars'. Print Edition | Subscribe