Rio Tinto to acquire Arcadium Lithium in a ‘significant’ moment for lithium market

The agreement, valued at about $6.7 billion, has been unanimously approved by both companies’ boards of directors and is expected to close in mid-2025 subject to an Arcadium shareholder vote, according to joint announcement published on Wednesday.

“This feels like a significant moment for lithium and shows how far the market has come in recent years,” one market participant told Fastmarkets.

“A deal like this, with a counterparty of Rio Tinto’s stature, shows that the lithium market is reaching a key level of maturity in its evolution,” a consumer said.

With the deal, Rio Tinto, a significant producer in many commodity markets such as iron ore and aluminium, will join the list of major lithium producers globally, alongside the likes of Albemarle, SQM and Ganfeng Lithium.

Arcadium Lithium, a company formed from a merger of Allkem and Livent, was created in January 2024 and has capacity of 75,000 tonnes per year of lithium carbonate equivalent (LCE) across all of its products.

Meanwhile, Rio Tinto, until now, has been a relatively small player in the lithium space with a number of assets in the pipeline.

These assets are the Rincon project in Argentina, which will use direct lithium extraction (DLE) technology to produce 3,000 tpy of lithium, set to begin production later this year.

Rio’s other asset is the Jadar lithium-boron project in Serbia, which has the potential to be Europe’s largest lithium mine, with slated capacity of 58,000 tpy of battery-grade lithium carbonate.

But the project has run into a number of hurdles due to backlash from local communities in Serbia.

The merger of the two companies creates an environment where Rio Tinto can leverage Arcadium’s lithium expertise, particularly in the field of DLE where Arcadium has been a long-standing participant through its Salar del Hombre Muerto project in Argentina.

For Arcadium, the move provides access to significant capital to assist in the development of its ambitious expansion plans which would more than double its annual capacity by the end of 2028.

“Arcadium Lithium is an outstanding business today and we will bring our scale, development capabilities and financial strength to realize the full potential of its Tier 1 portfolio,” Rio Tinto chief executive officer Jakob Stausholm said in the statement.

“This is potentially a major development for the lithium market as it will catapult Rio Tinto from a position of relatively little lithium exposure to being a leading global producer,” Fastmarkets head of battery raw material research Paul Lusty said.

A ‘counter-cyclical’ acquisition

The deal comes at a time when lithium prices sit at multi-year lows, having fallen more than 80% since their highs in late 2022.

Fastmarkets assessed the lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price cif China, Japan & Korea at $9-10 per kg on Tuesday October 8, down from $9-10.55 per kg the previous day. Lithium hydroxide prices are down close to 89% since December 2022 when they were at $84-86 per kg.

Fastmarkets assessed the lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea stable at $10.70-11.30 per kg on the same day, down 86% in the same timeframe.

“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,” Stausholm said in the statement.

“This is a classic attempt to buy the dip for Rio, snapping up some high-quality lithium assets when spot prices are around 80% down on their highs,” Matt Britzman, senior equity analyst for Hargreaves Lansdown, told Fastmarkets.

The acquisition value of $6.7 billion is significantly higher than the initial approach bid reported late last week, which stood at $3.3 billion. But the deal is still “a touch under 20% of where Arcadium was trading when the company was formed in January,” according to Blitzman.

Reaction to the news mixed among market participants

Although the deal is considered a significant development within the market, overall reaction to the news was somewhat mixed among physical market participants.

Fastmarkets understands that there was broad expectations that Rio Tinto would make a move into the lithium market, with rumors of the potential acquisition of Arcadium circulating before the initial announcement of an approach.

Some view the acquisition as supportive of the narrative of lithium’s strong long-term fundamentals.

“I think this is a positive sign for lithium,” a second trader told Fastmarkets. “It demonstrates the belief in the longer-term story of lithium, despite the current low prices.”

“This is a significant move from Rio Tinto, showing their confidence in lithium’s long-term story,” the consumer source said.

This view was echoed by Rio in its announcement, with the company outlining its confidence “in the long-term outlook for lithium, with more than 10% compound annual growth rate (CAGR) in lithium demand expected through to 2040 leading to a supply deficit.”

It added that the “acquisition comes at a time with substantial long-term market and portfolio upside, underpinned by an appealing market structure and established jurisdictions.”

Fastmarkets analysts forecast that the market will continue to record surpluses in lithium supply until 2027, when demand will once again outstrip supply.

Fastmarkets currently forecasts a deficit of 17,096 tonnes in 2027, increasing to more than 68,000 tonnes in 2028. Fastmarkets analysts forecast a CAGR in lithium demand on an LCE basis at 12% out to 2034.

But although it is viewed by some as a positive signal for lithium’s longer-term story, there is not much expectation of any immediate impact on the market from the acquisition agreement.

“The acquisition doesn’t cause much discussion in China. It is mostly beneficial to Rio Tinto’s own resource layout as the company will have both hard rock and brine resources after the acquisition,” one Chinese analyst source commented.

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