The restrictions in place to counter the spread of COVID-19 has played the role of a disruptor in many crucial sectors. The shift in the balance of power for the evolving lithium supply sector over the last few years, from the dominance of brine producers to hard rock spodumene mining activities, have however suggested that the mineral industry is better suited to the current ebbs and flows of the market situation. The sudden temporary mine closures have presented significant market challenges. While mineral operations might be able to build up production output after such closures, their proximity to areas of high population would encourage several of them to conform to stricter measures of restrictions and shutdowns for an extended period.
Based on company announcements regarding shutdowns and federal measures in the immediate aftermath of the outbreak of the pandemic, Bizlytik analysts estimate the loss of around 90 KT of LCE production over the year, translating to a monetary loss of around $945 million during such period of inactivity.
The dip in production in mines of Australia would directly contribute to the majority of the global output loss, with more than half of the overall loss being attributed to the region. However, no mines in Australia have currently ceased operations in its entirety, with several of the companies resorting to measures of operational scaling down with limited workforce in the mine sites and other notable measures. As such, the mines are projected to return to normalcy in a quick manner, once the measures of quarantine are gradually lifted.
The brine operations in South America appear to be much less affected by the onslaught of the deadly virus. US-based Livent Corporation has already announced the re-opening of its Argentina-based Hombre Muerto operations. In contrast, Australia-based Orocobre Limited has given active indications of opening its Olaroz site in Argentina in a limited capacity. Nevertheless, the production losses in Argentina would likely contribute around 30% to production losses on a global scale, owing to the delay in several expansion projects that would have been underway in normal circumstances. In Chile, SQM S.A. has denied any material impact on operations and productivity due to the lockdown measures in place for the prevention of COVID-19 virus, with other production activities in the Atacama following similar suit. Bizlytik analysts have estimated the loss in production to be well below 18% in Chile.
According to Bizlytik analysts, the continued application of mined lithium in storage battery production and wide adoption of lithium-ion batteries in electric vehicles would continue to propel the prospects of market growth over the forecast period. However, the negative environmental impact of lithium mining might cause a hindrance to the market growth rate. The continued federal funding and investments into the research & development of lithium batteries for incorporation in next-generation electric vehicles would offer key players new opportunities for business expansion in the coming years.