Albemarle has confirmed it is crimping its investment plans in WA as part of a $US1.5 billion ($2.2 billion) cut in capital spending globally over the next five years, in response to soft conditions in the lithium market.

While the decision is a blow for the local economy, locally listed lithium miners beaten down by the recent market weakness for the commodity have benefited from the news.

The US chemicals giant announced this week it would wind back the initial capital investment in its Kemerton lithium hydroxide plant from a capacity of 75,000 tonnes a year to 50,000tpa.

It will also shelve plans for a stage three, four and five expansion, which could have lifted capacity to 125,000tpa.

The company expects to begin commissioning the 50,000tpa Kemerton plant, which is under construction, in the first half of 2021.

The company also confirmed it would not go ahead with a proposed 50,000tpa plant at Wodgina in the Pilbara, as part of its recently revised joint venture arrangement with Mineral Resources.

Albemarle chief executive Luke Kissam referred to caution in the energy storage value chain caused by the potential impact of electric vehicle subsidy changes in China, possible shifts in cathode chemistry, excess inventory along the supply chain and an oversupply of lithium carbonate in the market.

“All of this has put downward pressure on price, and we expect to see this pressure on carbonate pricing continue in the near term,” he said.

“But we also expect supply/demand dynamics to tighten in 2020.

“We have always stated we would add production capacity to meet demand.”

MinRes announced last week that it had re-cut its joint venture deal with Albemarle that would see the US company lift its stake in Wodgina from 50 per cent to 60 per cent, but hand the Chris Ellison-led company a 40 per cent stake in the Kemerton processing plant and $US820 million in cash.

Mr Kissam said the Wodgina mine would still have the ability to support at least a 100,000tpa lithium hydroxide facility.

“However, any additional conversion capacity expansions in this joint venture will be based on market dynamics, and we would expect a lower capital intensity per metric tonne of capacity,” he said.

“This transaction still unites the mining expertise of MinRes with the lithium expertise of Albemarle and the modification accelerates the joint venture’s ability to bring lithium hydroxide to the market.”

Albemarle said the scale-back was part of a plan for it to be operating cashflow positive by 2021 and be in a position to build or buy chemical conversion capacity as the market required.

Each has reported delays with either production or shipping in recent months amid the soft lithium market conditions.