MW Rio Tinto's $6.7 billion lithium deal could usher consolidation in key industry for EVs

By Claudia Assis

It also comes as lithium prices have dropped more than 60%, hit by lower EV demand

Rio Tinto Plc.'s $6.7 billion deal to buy Arcadium Lithium Plc. could shift the lithium industry's prospects as it marks the arrival of the "mega miners" to the fray.

Anglo-Australian Rio Tinto (UK:RIO) has agreed to buy Arcadium Lithium (ALTM) in an all-cash deal for $5.85 a share expected to close next year. Arcadium Lithium was created in January 2024 after Livent and Allkem merged.

The "competitive landscape [is] shifting with entrance of mega miners," Mizuho analyst John Roberts said in a note Wednesday. "To date, the lithium industry has been dominated by relatively focused producers."

Lithium is a key metal in batteries powering EVs and hybrid cars, to say nothing of a myriad of consumer electronics. Industry leaders include Albemarle Corp. $(ALB)$, which started as a brine-based bromine producer, Chile's Sociedad Quimica y Minera $(SQM)$, which started as a brine-based potash producer, and a couple of Chinese startup producers.

ExxonMobil Corp. $(XOM)$ launched its Mobil Lithium business late last year, and is planning for its first lithium production in 2027. The energy giant has said it expects to produce enough lithium to supply about 1 million electric vehicles a year by 2030.

Tesla Inc. $(TSLA)$ has a lithium plant under construction in Texas to convert lithium ore to battery-grade chemicals.

The deal also comes as lithium prices are "crashing," Roberts said, coming from a shortage in early 2023 that contributed to rising EV-battery prices to excess supply "as long-cycle expansions collide with decelerating short-cycle demand for EVs."

Lithium prices have dropped more than 60% in the past 12 months, according to Benchmark Mineral Intelligence's Lithium Price Assessment.

Benchmark has said that the deal signals Rio Tinto's "confidence" in the long-term demand for lithium. The deal also boosts Rio Tinto to the Top 5 lithium producers.

-Claudia Assis

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October 09, 2024 12:20 ET (16:20 GMT)

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