The salt flats of Argentina, part of the "lithium triangle" in South America, have historically been a hotbed for extracting lithium, crucial for global electrification. However, companies are now facing setbacks. A surplus in supply and lower than expected demand for electric vehicles have led to lithium prices plummeting by over 80% since early last year, affecting the global lithium industry. This has hampered financing activities and slashed profit margins for lithium miners of all sizes. As the world's fourth-largest lithium producer with the second-largest lithium resources, Argentina has been an essential location for investors seeking to secure supplies.
Australian company Galan Lithium is developing a project in Catamarca Province, currently aiming for production in the latter half of next year. However, it has revised its initial target down by approximately 25% due to the current market climate, planning to produce 4,000 tons per year instead of 5,400 tons. The drop in lithium prices is pressuring miners to reduce costs, while also increasing interest in mergers and acquisitions as companies seek more financially robust partners to weather the economic downturn.
Mining giant Rio Tinto recently agreed to a $6.7 billion acquisition of US-based Arcadium Lithium, making it the world's third-largest lithium miner. Analysts expect more mergers and acquisitions, especially concerning early-stage projects. Companies with resources but no production in Argentina may attract potential buyers.
Despite the price challenges, Argentina might witness the launch of several advanced projects in the near term. However, production is expected to decline between 2026 and 2028, potentially leading to a supply shortage towards the end of the decade as EV battery and energy storage demands rise.
Argosy Minerals, another Australian company, has halted investments, shutting down a pilot plant in Argentina and laying off workers. Lake Resources is seeking permissions for its Kachi project while looking for financing through equity investments and supply agreements, predicting a lithium supply deficit by 2030. Arcadium has also paused expansions in Canada and Argentina, projecting a cost saving of $500 million over the next two years.
Argentina continues to attract global companies with market-friendly regulations and investment incentives, aiming to boost its struggling economy. Analysts highlight that this restructuring phase may create opportunities for buyers seeking low-cost acquisitions, as the valuation of lithium companies has dropped significantly. However, some analysts predict that low pricing might persist into 2026.
