Critical minerals sector eyes Chinese partnerships to cut costs, boost technology: LME Week

Miners are increasingly partnering with Chinese companies to leverage their engineering and project delivery capabilities, which offer significant cost and speed advantages, according to panelists at the FT’s Mining Summit held in London on Friday September 27.

In the panel “Critical Minerals & the Future of the Battery”, Geoff Streeton, chief development officer at French non-ferrous miner Eramet, highlighted this trend.

“The Chinese engineering and project delivery ecosystem is able to deliver [large capital-intensive projects] with a step change in cost and speed relative to the traditional project delivery models,” Streeton said.

Eramet, a significant producer of nickel, already has several partnerships with Chinese firms across their global operations.

These include a partnership with Chinese firm Tsingshan, the world’s largest stainless steel producer, for nickel mining and refining in Weda Bay, Indonesia. The two companies also have a joint venture agreement for the operation of the Centenario direct lithium extraction plant in Argentina.

Ivan Vella, managing director and chief executive officer of Australian miner IGO, discussed their partnership with Tianqi Lithium in Australia.

He emphasized the importance of these collaborations, saying: “I think it’s fundamental. The strength of the broader battery and EV (electric vehicle) industry in China, with companies like Ganfeng and Tianqi, is formidable. Being partnered with Tianqi gives us a lot of insight and strength.”

Indonesia perhaps provides one of the best examples of this speed and cost competitive scaling of projects. Chinese firms within the country have been able to develop, build and operate nickel refining assets at considerably lower cost than many other nickel producers, a trend which has ultimately shifted the global supply-demand balance of the market.

Streeton also highlighted the complementary skills that Western companies bring to these partnerships.

“You have to bring also to the table the skills that they lack… which is around how you manage workforce, how you manage ESG (environmental, social, and governance) issues, and how you ensure that community development can be done properly,” Streeton said.

Europe’s EV supply chain should work more closely with its Chinese counterparts to technologically catch up, according to experts at Fastmarkets’ European Battery Raw Material conference in Amsterdam on September 16-18. Several speakers emphasized the importance of forming partnerships with Chinese technology companies for immediate transfer of technology to help Europe develop knowledge and drive down costs in its battery supply chain.

Low prices threaten future critical mineral supply

Though partnerships with Chinese firms can provide benefits to Western producers of critical raw materials, the current price environment for battery metals like lithium and nickel are providing a barrier to investments in new projects and exploration.

Hanna Schweitz, director of battery materials and asset development at WMC Energy, said, “It’s of course a very high risk that at these prices you see less investments, less companies can spend money on actually investing in finding the best deposits.”

In the lithium market, it is typically said that the incentive price for investment in expansions or new projects sits around $20-25 per kg on a lithium carbonate equivalent (LCE) basis, depending on the resource and region.

At present, lithium prices sit well below this level.

Fastmarkets’ daily assessment of the lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea was $10.70-11.30 per kg on Tuesday October 1. 

Nickel is a more complicated market to evaluate in terms of incentive prices, because it depends on the type of nickel being produced and the technology being used. But typically, non-Indonesian producers of nickel have sat on the higher side of the cost curve.

The benchmark price for nickel remains the London Metal Exchange nickel cash price. The LME nickel cash official price closed at $17,002 per tonne on September 30, up from $16,652 per tonne on September 27.

The LME nickel cash price is down by close to 12% since June 1.

IRA and the battery metal regulatory landscape

Panelists at the FT’s Mining Summit also discussed how the Inflation Reduction Act (IRA) in the US might influence battery metal sourcing.

“No OEM (original equipment manufacturer) wants to take the risk of having some non-compliant material in their supply chain with the risk of losing the money if they are not adherent to the rules,” said Schweitz.

Streeton commented on the IRA’s potential impact, saying, “You’ve got to factor in that these are policy interventions. They’re not structural interventions that are permanent potentially.”

Vella expressed scepticism about the IRA’s impact on raw material suppliers, stating, “I don’t know of anyone who can reference the point where that EV subsidy actually flows all the way back to the raw material supplier… and even if it did, how material would it be?”

The post Critical minerals sector eyes Chinese partnerships to cut costs, boost technology: LME Week appeared first on Fastmarkets.