Mining giant closes $6.7B lithium deal as China’s oversupply impacts metal’s price

Rio Tinto, the world’s second-largest mining company, has announced a $6.7 billion agreement to acquire Arcadium Lithium, a move that positions the company as one of the top producers of a key metal critical to the clean energy transition. Lithium, referred to as “white gold,” is essential for renewable energy technologies such as solar panels, wind turbines, electric vehicles and energy storage systems.

“Arcadium Lithium is a leading global lithium producer with the widest offering of lithium chemical products and a world-class manufacturing network, backed by a broad technology portfolio and expertise in all aspects of the lithium value chain,” Arcadium Lithium CEO Paul Graves said.

With this acquisition, Rio Tinto will gain access to lithium mines, processing facilities, and deposits in Argentina, Australia, Canada, and the United States. Additionally, it will secure Arcadium’s customer base, which includes prominent brands such as Tesla, General Motors, and BMW.

According to Rio Tinto CEO Jakob Stausholm, the company predicts lithium demand will increase by 10% annually through 2040, driven by the global push towards renewable energy. Stausholm’s team believes the increasing need for this metal will ultimately create a shortfall in supply by the end of the decade.

“Acquiring Arcadium Lithium is a significant step forward in Rio Tinto’s long-term strategy, creating a world-class lithium business alongside our leading aluminum and copper operations to supply materials needed for the energy transition,” Stausholm said in a statement. “This is a counter-cyclical expansion aligned with our disciplined capital allocation framework, increasing our exposure to a high-growth, attractive market at the right point in the cycle.”

Rio Tinto’s acquisition comes as the lithium market is currently experiencing a price decline, largely due to Chinese oversupply. China controls roughly two-thirds of the global lithium stock and has been flooding the market with the metal, driving down prices.

American officials accuse Beijing of using predatory pricing tactics to undercut competition and push rival lithium producers out of the market. While the cost of lithium tripled between 2021 and 2022, its value then fell sharply, with prices having now dropped by over 80% in the past year.

Despite the recent price declines, the global market size for the metal is still expected to grow by nearly $20 billion over the next decade. With its recent acquisition, Rio Tinto is positioning itself to capitalize on this growth, betting on a resurgence in lithium prices as demand for clean energy technologies continues to rise.