The lithium sector has a major role to play in broadening the appeal of Western Australia’s resources offerings, a recent RSM forum has heard.
Growing demand for the battery minerals required to support the global energy transition presented an opportunity for Western Australia's resources sector, Australian Institute of Company Directors chief economist Mark Thirlwell told a recent RSM breakfast forum in Perth.
Exploring WA’s place in a turbulent global economy, Mr Thirlwell reignited familiar sentiment regarding the state’s status as a specialised exporter.
“Australia remains significantly exposed to the Chinese economy and WA remains even more so,” Mr Thirlwell said.
“One of the things Australia did really well was ride to benefit and ride on China’s industrialisation and urbanisation wave.”
In 2021-22, WA’s total goods exports to mainland China were valued at $135.6 billion, representing 56.1 per cent of the state’s export market.
Mr Thirlwell acknowledged the relationship had been beneficial for the state, but said consideration was needed in terms of managing it in the future.
“If China’s growth model changes then Australia’s reliance on that model will have to shift, too,” he said.
But Mr Thirlwell said WA was well placed to capitalise on the new opportunities the global energy transition could bring.
His leading example of this was the growing prevalence of lithium in WA’s commodity export mix.
Even though China is WA’s largest market for lithium – accounting for 96 per cent of exports in 2021-22 per the Department of Jobs, Tourism, Science and Innovation (DJTSI) – its rocket to prominence during the past 12 months paints an encouraging picture for a sector still in its formative years.
“Just one example, lithium exports, Australia is currently the world’s largest exporter of lithium … WA accounts for about 99 per cent of those exports,” Mr Thirlwell said.
The Department of Mines’ latest mineral and petroleum review showed that lithium was the state’s third highest value mineral by sales.
Spodumene concentrate sales volumes hit an all-time high of $6.8 billion, more than two and a half times its previous record.
“If you were thinking about where you’d like to ride out this kind of challenging economic environment, what kind of strengths you’d want to bring to it, what opportunities are going to be involved, then Australia in general, and WA in particular, is actually a pretty good place to be,” Mr Thirlwell said.
Old strengths
Rio Tinto and BHP remain atop Business News’s Data & Insights list of WA’s biggest exporters.
And WA is still comfortably the world’s biggest exporter of iron ore in its own right, supplying 919 million tonnes of ore and accounting for 37 per cent of global supply in 2021, followed by Brazil at 17 per cent, per DJTSI.
In terms of challengers to WA’s place at the top of the iron ore food chain, the situation remains much the same as last year.
It is thought that Rio Tinto’s bid to kick-start the Simandou project in Guinea could eventually materialise as a real threat to WA’s iron ore dominance.
But recent commentary from Deloitte has indicated that Brazil poses a more immediate risk to investment in new WA iron ore projects.
“Export volumes are still hovering below pre-pandemic levels.
Despite extraordinary growth in iron ore and other metals prices over the last two years, the state has little capacity to ramp up production in the near term,” a June outlook read.
“A recovery in Brazilian iron ore output – which has been hobbled for the last three years first by tailings dam disasters, then by COVID-19, and most recently by inclement weather – will also add downward pressure on prices over the next few years, reducing the incentive to invest in new mine capacity even further.”
New operations including Rio Tinto’s Gudai-Darri, BHP’s South Flank and Fortescue Metals Group’s Iron Bridge venture with Formosa steel, are the latest Pilbara projects to bolster output in WA.
In terms of outlooks for our big trading partners, Treasurer Jim Chalmers’ first federal budget hedged risk heavily to the downside for exports to China, pointing to “chances of severe (COVID) outbreaks, further declines in the property sector, ineffectiveness of fiscal stimulus, and weakening global demand for Chinese exports”.