Buying close to the bottom of the market should mean bagging a bargain. Rio Tinto is buying Arcadium Lithium at a time when slowing demand for electric vehicles is savaging the price of lithium used in batteries. The lithium carbonate price has dropped more than 80 per cent since its peak. Yet for all of Rio chief executive Jakob Stausholm’s talk of countercyclical moves, the $6.7bn price tag for Arcadium is not a steal.
Rio knows all too well the dangers of buying at the top of a market. Memories of its disastrous $38bn takeover of Canadian aluminium group Alcan in 2007 — right at the top of the aluminium market — still loom large. Arcadium is its biggest acquisition since. This time, Rio is betting that a painful lithium supply glut will reverse towards the end of the decade.
Rio already has one lithium scheme that is close to production: Rincon in Argentina. Another proposed project in Serbia has been hit by protests. Arcadium would contribute immediate annual production of about 75,000 tonnes of lithium carbonate equivalent — its current production is in Argentina and Australia — but it has expansion plans to double capacity by the end of 2028.