Wesfarmers tips $60m loss at Covalent Lithium joint venture with SQM, expects more pain ahead

West Australian

21-05-2025

Wesfarmers has revealed it expects to book a $60 million loss for its share of the Covalent Lithium joint venture this year as it concedes prices for the key battery metal will remain depressed in the short term.
And it warned investors that figure could climb even high in 2025-26.
But the retail conglomerate — which holds an equal share of the $2.6 billion joint venture along with Chile's SQM — told analysts at an investor briefing day in Sydney on Thursday that it expects demand to remain strong over the medium to long term.
Covalent runs the Mt Holland mine south of Southern Cross and is building a lithium hydroxide refinery at Kwinana.
Wesfarmers told analysts that global electric vehicle penetration was forecast to increase from 19 per cent in 2024 to 41 per cent over the next six years, and that new supply would be required 'to meet anticipated strong long-term demand'.
But it acknowledged new global lithium projects coming on line were holding back a price rebound.
Prices of the spodumene concentrate produced by WA miners to power EV are yet to show any meaningful signs of improvement and remain more than 90 per cent off their late 2022 peak.
The prevailing price is currently $US690 a tonne, according to Shanghai Metals Market, down about $US130/t in the space of a month and continuing a broad decline over the past two years.
Wesfarmers also pointed to the global upheaval caused by President Donald Trump's war on tariffs as a potential threat to a price recovery.
'The full impact of US tariffs on the battery value chain is unknown and creates uncertainty in the short term,' it said.
Wesfarmers' share of output from Mt Holland this financial year is set to come in at about 140,000 to 150,000 tonnes as the plant ramps up to nameplate capacity.
It said the following financial year would be one of transition, with higher unit costs expected as the lithium hydroxide refinery at Kwinana ramps over an 18-moth period after first product. The refinery is now 88 per cent complete and commissioning is due to start by the middle of this year.
'At current subdued pricing, losses in FY26 are expected to be greater than FY25, impacted by the timing of ramp up and product qualification,' it said.
Wesfarmers will be hoping to avoid the problems that have held back production of its neighbour.
IGO's refinery has been plagued by technical problems for years and chief executive Ivan Vella earlier this month conceded the miner was running out of patience with the project it shares with Tianqi.
IGO and Tianqi in January aborted expansion works at Kwinana and shortly after crossed out $525m of the refinery's book value.
The operation incurred a net earnings loss of $161.1m for the first half of the 2025 financial year.
Mr Vella said the battery metals producer 'cannot continue to just spend money' at the Kwinana refinery 'without a clear path of where that takes us economically'.