Analysts are calling for calm as a series of false starts, delays and lay-offs look set to destabilise Western Australia's burgeoning multi-billion-dollar lithium industry.

Key points: Demand for lithium is slowing, as sales of products such as batteries and electric cars fail to meet global projections

Demand for lithium is slowing, as sales of products such as batteries and electric cars fail to meet global projections Analysts say Western Australia is still one of the cheapest sources of lithium in the world

Analysts say Western Australia is still one of the cheapest sources of lithium in the world Job losses seem likely after owners of a lithium mine in WA's Goldfields region is placed in voluntary administration

The chemical element is key to the growth of several industries, including electric cars and energy storage systems, and vast deposits have been identified in regional areas of WA.

Talison Lithium, the world's largest producer of lithium concentrate products, announced last week that it had "paused" an expansion project at its mine at Greenbushes in the South West, one week after securing environmental approval.

The company had just completed the expansion of its CGP2 (Chemical Grade Plant) project at Greenbushes, which will ramp up production capacity to 1.34 million tonnes per year.

"CGP3 construction activities are currently paused as Talison's shareholders review the timing of construction and the need for additional volumes of spodumene concentrate to align with the converting capacity additions of the shareholders," a spokesperson said.

"Greenbushes remains a profitable and world-class hard-rock lithium mine with a long and proud history of operating safely and supporting the South West communities in which we operate."

The spokesperson said the delay would not impact its workforce.

Job losses likely

In WA's Goldfields region, the owners of a lithium mine near Kambalda were placed in voluntary administration as ASX-listed Alita Resources collapsed amid debts of $42 million.

About 60 workers and 200 contractors are likely to be out of a job.

It follows the revelation that the Mount Marion lithium mine near Kalgoorlie-Boulder was selling its product at a 43 per cent discount.

Shipments of lithium which departed Mount Marion between July and September last year were fetching $US1,070.85 per dry metric tonne.

Mineral Resources, which owns a 50 per cent stake in Mount Marion alongside China's Ganfeng Lithium, revealed it had set its sale price for 6 per cent spodumene concentrate shipments for the current quarter at $US608.95 per dry metric tonne.

That is down again from $US682.38 for the June 2019 quarter.

In a statement, Mineral Resources said Mount Marion "remains a profitable and highly valuable long-life lithium asset".

Reflection of demand

Mining analyst Tim Tredgold said the teething problems were not cause for widespread concern just yet.

"What is happening at Greenbushes is a direct reflection of global demand for electric vehicles — they are not accelerating away as quickly as people expected," he said.

"The mine itself remains very profitable and is in good order, but the problem is occurring in the end market for lithium and that just hasn't picked up."

Greenbushes is operated by Talison Lithium, the world's largest producer. ( ABC News: Sean Murphy )

Mr Tredgold said he expected to see "some of the more ambitious lithium projects" in WA continuing to be mothballed until demand returned.

"If a company is high cost and doesn't have a good project, they will be in trouble," he said.

"It all comes back to demand; if you are high cost and your competitor is low cost, you've got a problem."

Economics professor Alan Duncan from Curtin University said the recent downturn in lithium-based mining productivity mirrored fluctuations often dealt with by gold and mineral mining companies.

"There is real potential in lithium and WA is so well placed because of our natural endowment — we have among the largest deposits of lithium across the world," he said.

"But it is clear we are seeing some fluctuations in the price and that clearly is a challenge for the business lithium mines and refineries are facing."

Key is downstream

Mines and Petroleum Minister Bill Johnston said lithium mining was worth "hundreds of millions of dollars" to the state's economy, with potential for that to move into "billions" if "we get it right".

He said fluctuations in global prices and demand were likely to continue to pose problems for miners.

WA has among the largest deposits of lithium in the world. ( ABC South West: Ruslan Kulski )

"The mining companies are operating in a world market and they need to be competitive in their cost structure to make sure that they can keep their projects on track.

"That is one of the reasons we are trying to move further down the value chain because there are less opportunities for fluctuations if you are part of the global supply for processed materials."

Mr Johnston said the Government was continuing to look at "every aspect of the value chain", as a way of boosting revenue and stabilising employment in the sector.

"The next step down the chain is to go from lithium hydroxide to combine that with nickel sulphate and cobalt sulphate to form precursor chemicals," he said.

"Once we have a position in the precursor chemical industry, we are hoping to move even further down the value chain to anode and cathode manufacturing."