ASX lithium shares have taken a beating in 2024, spurred on by weakness in the price of the underlying battery metal.
Lithium carbonate currently sells at CNY 75,000 per tonne, more than 87% lower than the metal's peak in 2022.
And the softness in pricing has flowed on to impact some producers.
Arcadium Lithium PLC (ASX: LTM) has announced plans to mothball its Mt Cattlin lithium mine, citing a sharp and extended drop in lithium prices.
Let's take a closer look.
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ASX lithium shares under pressure
Arcadium has been hit hard by the lithium price slump that's been in situ for about two years now.
The Cattlin mine, located in Western Australia, was still profitable in the June quarter.
However, given the lull in pricing, the decision has been made to "suspend Stage 4A waste stripping and any expansionary investment beyond Stage 3."
The company plans to place the site into "care & maintenance" by the end of H1 CY 2025. Importantly, it does not intend to close the mine – only put it into hibernation.
CEO Paul Graves said keeping the mine wasn't economically feasible:
We remain committed to developing our global portfolio of hard rock assets and are confident that they will continue to be a significant part of Arcadium Lithium's growth story.
Unfortunately, production at Mt Cattlin beyond the current stage of the open pit cannot be justified in the current price environment for spodumene.
We will maintain open and transparent dialogue with all of our stakeholders while supporting our employees and communities in Western Australia during this transition period.
What does this mean for ASX lithium shares?
The closure of Mt Cattlin could provide some relief for the company in the long run. By reducing production, Arcadium may help stabilise its exposure to lithium prices, which have been under pressure due to oversupply and a slowdown in electric vehicle (EV) sales.
But it isn't the only one feeling the pinch.
Its move follows similar decisions from Albemarle Corporation (NYSE: ALB) to cut back its Australian lithium operations in August, which was an industry-shaking move.
Whereas Core Lithium Ltd (ASX: CXO) has paused its Northern Territory-based Finniss project for similar reasons.
Mine economics have to stack up. That's a fancy way of saying, they have to make money. Such is the case for the Cattlin project.
Despite this, Bell Potter remains optimistic about Arcadium's long-term prospects.
It rates the ASX lithium share a buy with a price target of $7.25. The broker believes that, should the lithium market rebound, Arcadium's diversified production capacity and balance sheet will position it for substantial growth.
Arcadium itself expects to increase net cash flow by between $US75 million and $US100 million in 2024 and 2025 through these efforts.
Additionally, Macquarie rates Arcadium shares a buy with a target price of $6.60.
Foolish takeout
Arcadium's decision to place its Mt Cattlin mine into hibernation highlights just how difficult it is for ASX lithium shares right now.
In the last 12 months, the stock is down more than 65%.
