Lithium producers have created a new business that will become the world’s third-largest
Lithium producers from the US and Australia are setting up a US$10.6bn joint business. Livent of the US and Allkem of Australia are planning a merger to create the world’s third-largest lithium producer.
Experts say the news is in line with trends in the commodities market. The price of lithium carbonate, the main ingredient in car batteries, has been falling for some time. This situation drives down share prices, which in turn increases interest in mergers and acquisitions. Stronger companies are buying up competitors to strengthen their presence in the global market. The sector is extremely attractive at the moment, as the use of lithium plays a key role in achieving carbon neutrality targets.
The head of Livent will become the CEO of the new company, and the CEO of Allkem will become the Chairman. Australian shareholders will receive a 56% stake, and Livent will acquire a 44% stake. The transaction is expected to complete by the end of 2023. The company will be listed on the NYSE, and its head office will be in the US. According to the parties, the new company will increase lithium production. It will also allow producers to scale up and enter new markets.
Allkem, operating as Orocobre until November 2021, produces raw materials in Australia, Canada and Argentina. In addition to lithium mining and processing, the company also mines borax. Livent has facilities in Canada and Argentina, as well as in China and the US.
Lithium producers development plan
Lithium producers are interested in each other and in companies from different sectors. In October 2022, Elon Musk, head of Tesla Corporation, was considering buying a stake in Glencore’s mining business. There was talk of a 10-20% stake, but no decisive action was taken. This deal would have given Tesla an edge over its competitors in battery production.
After the surge, the demand for lithium began to fall. To keep prices low on the global market, Chinese companies set a minimum price of US$36,400 per tonne for lithium carbonate in April 2023. Ten companies participated in the agreement, including industry leaders Tianqi and Ganfeng. The reason for the move was a sharp drop in the spot price. They peaked in November 2022 and had fallen by around 60% by April. Another factor in the price drop was the reduced demand for electric vehicles in China, the world’s largest market.