Better Together: Lithium Merge Sparks Attention

Livent and Allkem Merge as Lithium Miners Consolidation Heats Up

Lithium producers are scrambling to get bigger as they look to take advantage of the tremendous opportunity for growth in the sector. With the global market for lithium growing from $1.6 billion in 2015 to $48 billion, companies have taken note. Livent and Allkem are the latest to join the consolidation spree as they look to strengthen their competitive edge. The two have agreed to join forces, to be better prepared to address the growing demand for lithium for use in electric vehicles.

Livent Allkem Merger

The merger will result in a $10.6 billion combined company that should wield significant power in the lithium mining business. Under the terms of the agreement, U.S-based Livent is to own 44% of the combined company, with Australia-listed Allkem owing the remaining 56%. The combined company will have its headquarters in North America and have a primary listing on the New York Stock Exchange.

The combined company is to manage crucial lithium mines in Canada, Australia, and South America, in addition to chemical processing plants in the U.S. and China. According to Livent Chief Executive Officer Paul Graves, the merger is expected to result in significant operational efficiencies. For starters, it will help reduce operating costs while accelerating lithium production.

The Livent and Allkem merger comes when Lithium prices have come down significantly after exploding over the past two years. Prices are down by about 30% for the year due to slowing demand for electric vehicles in China. In addition, increased volatility in the market has also made traders extremely cautious, all but affecting the prices.

Despite the significant drop in Lithium Prices, they are still high to incentivize Livent and Allkem to ramp up the exploration and development of their Lithium mines. In addition, demand for lithium is expected to continue increasing amid the push to decarbonize the globe.

According to the International Energy Agency, lithium demand is expected to increase 40 times by 2040 if the world is to achieve its Paris climate agreement targets. The electrification of the auto industry across the globe is already presenting one of the biggest markets lithium producers can address. In addition, the growing use of lithium in consumer electronics like smartphones, tablets, and laptops also presents another multi-billion market.

Industry Challenges

Amid the growing lithium demand, supply is yet to pick up pace as expected, owing to lots of bureaucracies in many countries. For instance, securing mining permits in developed countries like Australia has proved to be a big problem. The mining operations also require infrastructure, some of which still need to be developed.

Converting lithium into the final product for use in EVs and other consumer electronics is also a complex process.

In the race to circumvent the challenges, Lithium producers have been joining forces to enhance their geographic footprint and create companies with scale. Charlotte-based Albemarle is looking to close a $3 billion acquisition of Liontown Resources. Automakers have also started investing in lithium miners as they look to secure key supplies. General Motors has already invested $650 million in Lithium Americas, therefore securing the right to obtain the mineral from a mine in Nevada.

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