As lithium prices have declined in recent years, the market has seen a convergence in a specific area of lithium refinery production costs. Feedstock costs for lithium refineries have been gradually moving towards each other since lithium prices began dropping after 2022 highs.

Within its Lithium Refining Cost Service, Project Blue has categorised lithium refineries into three types as follows:

Integrated (refineries that procure lithium feedstocks at or near production costs).
Semi-integrated (refineries that acquire feedstock on the contract market, via long-term offtake agreements).
Non-integrated (refineries that acquire feedstock on the spot market).

When looking at the spodumene sector, it is clear that refinery feedstock costs have been converging for the previous two years. As spot and contract lithium prices have dropped, so too have feedstock costs at semi-integrated and non-integrated spodumene refineries. Simultaneously, upstream concentrate producers in Australia, China, and around the world have seen on-site costs increase in the face of higher energy, reagent, labour, and fuel costs, with only marginal reductions in royalties. This margin squeeze in the spodumene sector has also led to supply curtailments at a number of Australian and Chinese mines.

The result is a convergence in feedstock costs in which integrated, semi-integrated, and non-integrated refineries all have similar feedstock costs, and upstream integration, between lithium refineries and spodumene mines, is no longer the market advantage it once was.

However, given that lithium prices are forecast to rise over the coming decade on the back of high lithium-ion battery demand, this scenario is likely temporary . As prices rise, Project Blue expects to see a gap open between lower feedstock costs at integrated refineries, and higher- cost non-integrated refineries forced to buy material on the spot and contract markets. Therefore, there is the possibility of further integration between the upstream and downstream sectors of the industry as companies seek to take advantage of low lithium prices in acquisitions.

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