ANALYSIS: Two political decisions could shape WA’s downstream lithium future, as attention turns to Wesfarmers

What lawmakers in Canberra and Washington DC do next will play a big part in building the path forward for our state’s faltering lithium processing industry. Not even a year ago lithium — an ingredient used in electric vehicle batteries — was seen by many to be the future of WA’s powerhouse mining sector. But slower than expected global uptake of electric vehicles and a growing supply of lithium from mines outside Australia have pushed the commodity’s price down approximately 70 per cent in the space of 12 months. The price pinch has stung the junior end of town the most but even Albemarle — WA and Australia’s largest lithium producer — has been badly scathed. The United States-headquartered giant on Thursday announced it would shrink its Kemerton lithium hydroxide refinery near Bunbury, severing 300 employees in the process on top of the 150 or so construction jobs it culled earlier in the year. The lithium Albemarle produces in Australia does not qualify for subsidies under the US’ Inflation Reduction Act, which the company says was a major factor behind the Thursday decision. Albemarle’s move could spark a policy alteration given Australia and the US are actively trying to forge closer critical mineral supply chain ties to break China’s stranglehold. The New York-listed company’s Kemerton curtailment has also spurred Federal Resources Minister Madeleine King to mull bringing production tax credits forward from their current kick-in date of 1 July 2027. Downstream processors of critical minerals in Australia, which includes lithium hydroxide refineries, will be eligible for a 10 per cent tax offset. If the company is not turning a profit they are still able to get a 10 per cent refund on production costs. The sand in the hourglass is quickly shifting for Ms King to make a decision. Australia’s next lithium hydroxide refinery — and likely last for the foreseeable future — is at a critical juncture of construction. The refinery in Kwinana, which is owned by Wesfarmers and Chilean joint venture partner SQM, will process spodumene concentrate from the Mt Holland mine the duo recently brought online. Construction of the Kwinana facility is scheduled for completion by the end of this year and first product is targeted before the end of June 2025. Certainty around a new tax credit inception date could be make or break for Wesfarmers and SQM to push through the last stretch of construction and begin to crank out lithium hydroxide. In February Wesfarmers boss Rob Scott — a vocal advocate of the tax credits — conceded the conglomerate won’t be making money off lithium at current prices, which have since slumped further. Wesfarmers is in an information blackout period before its full-year financial results are released on August 29, where the company is expected to provide an update on its lithium foray.