In a significant development within the lithium market, the joint venture between Australia’s IGO and China’s Tianqi Lithium, known as Tianqi Lithium Energy Australia (TLEA), has decided to suspend its annual dividend distributions. This decision comes in response to an accumulation of unsold lithium hydroxide at their shared Kwinana Refinery and shifting trends in global battery production.

Addressing Market Shifts and Inventory Surplus

The Kwinana Refinery, partially owned by IGO with a 49% stake, has seen a considerable increase in its lithium hydroxide stockpile. This inventory surge is anticipated to persist into the medium term, exacerbated by a market shift away from lithium hydroxide toward lithium carbonate, favored for its compatibility with lithium iron phosphate (LFP) batteries used in various applications from hybrid vehicles to energy storage systems.

The pivot in market preference has been sharp, spurred by the evolving needs of the electric vehicle industry and energy sector, prompting some lithium converters to adapt their production lines to meet the rising demand for lithium carbonate. This strategic shift has directly impacted the demand for lithium hydroxide, leading to the current stockpile at TLEA’s operations.

Economic Implications and Future Projections

In light of these challenges, IGO has stated that it anticipates no dividend payouts from TLEA for the fiscal year 2025, with no clear guidance on when dividends might be reinstated. This pause reflects a broader strategy to stabilize operations amid fluctuating market demands and inventory adjustments.

However, it’s not all challenging news within the broader joint venture operations. The Greenbushes lithium mine, which TLEA co-owns with American lithium giant Albemarle, continues to generate robust cash flows, demonstrating resilience amidst market variability. This suggests that while refined lithium product segments face headwinds, the raw lithium extraction business retains its strength and profitability.