A cluster of facilities is being constructed at a rate that would have seemed improbable five years ago, some 25 kilometers south of Perth, where the industrial zones along the Cockburn Sound give way to the kind of flat, scrubby environment that Western Australia produces in seemingly endless quantities. Storage tanks and cranes. processing structures that are being built next to the water. For many years, the Kwinana industrial strip has been home to chemical facilities, refineries, and other infrastructure that doesn’t draw tourists. Who is paying attention to it and why is different now.
Over one-third of the world’s raw lithium is produced in Australia. This has been the case for some time, and for the majority of that time, the nation’s involvement in the battery supply chain was essentially the start of the process: extract spodumene ore, export it, and let other nations, mainly China, handle the costly and technically challenging task of turning raw ore into battery-grade lithium hydroxide or lithium carbonate. For a long time, the division of labor made economic sense. Building EV and energy storage supply chains that avoid using Chinese refining facilities is becoming less acceptable to Western governments and businesses.
It is undeniable that China dominates the lithium refining industry. Regardless of where the ore was first harvested, it processes the vast majority of battery-grade lithium produced worldwide. That reliance is a serious issue for American, European, and Japanese automakers attempting to adhere to regulations requiring domestic or allied-nation battery content; the most obvious example being the battery component requirements of the Inflation Reduction Act. With a sizable raw material reserve, a stable regulatory framework, pre-existing industrial infrastructure, and a government actively working to move the nation up the battery value chain rather than continuing to export raw materials, Australia is in a geopolitically advantageous position.
Being in an area with an existing industrial footprint is advantageous for the Kwinana strip. There is port access. There is access to water. There are the electrical grid connections needed for a lithium hydroxide facility. The investment needed to turn such benefits into large-scale processing facilities has been lacking. That’s what’s coming in right now—from IT firms that require the security of their battery supply, from EV makers who need the supply of battery materials guarantyd for years to come, and from energy businesses who see grid-scale storage as a multi-decade growth market.
The investing community believes that there is a short window of opportunity to create a credible non-Chinese lithium refining presence. From investment decision to production, the construction of a lithium hydroxide factory takes many years. The businesses making the move now are placing a wager that demand will exist when the plant is operational and that the geopolitical advantage of a supply chain that avoids China will outweigh the higher processing costs in Australia when compared to what Chinese refiners presently charge. That wager makes sense, but it’s still a wager. Lithium prices are erratic, analysts have been taken aback by EV adoption rates in both directions, and battery chemistry technology is continually developing in ways that may alter market demands.
The Australian government has taken a purposefully positive stance. State-level processing grants and federal critical minerals strategy documents are intended to lower the financial risk of investment decisions for businesses that are otherwise ready to make them. The question of whether such incentives are appropriately calibrated—rich enough to spur investment without being so generous as to draw in projects that wouldn’t otherwise be feasible—will be determined by what is actually constructed and how profitable it is.
