In fact, we’ve already started to see reduced production from some of these higher costs and largely unintegrated operators. And as we’ve said in the past, the amount of lipidolite production that has come into the market is actually a symptom of insufficient supply from other sources. Also, it’s worth noting that the average lithium content in hard rock production has been lowered in most operations resulting in greater output, but higher processing costs and lower downstream utilization rates. What we see is that the energy storage supply chain, broadly speaking, is working through inventories that were built at the end of ’22 and early 2023. We see this destocking occurring well downstream of lithium itself with battery cell producers, mainly in China, curtailing or even stopping production as they reduce their inventory levels of finished cells and as we’ve seen in prior lithium price cycles, the magnitude of price moves for lithium is being amplified by the behavior of lithium purchasers, particularly in China.
With underlying long-term end market demand remaining strong and supply chain inventory levels declining to levels that cannot support more than a few weeks or maybe months of sales, if history is repeated, we will see a rapid increase in the price of battery materials when buying restarts. It’s important to note that this dynamic we are referring to is not being driven by the behavior of Livent’s core customer base, namely the global OEMs. They continue to be highly focused on securing reliable sources of long-term lithium supply, and especially through supply chains that are able to be all or in part IRA subsidy eligible. This key customer base is also focusing more closely on its role as a partner in providing commercial, technical and financial support for lithium development projects.
And while we expect OEMs to continue to seek out ways to stimulate more lithium production in the future, we believe they will be far more focused on supporting proven companies rather than those with more expensive or technically challenging resources. The key takeaway I would leave you with is that today’s market conditions do not, to us, reflect equilibrium supply demand conditions for lithium. The factors that give us confidence in sustainably higher lithium prices in the foreseeable future haven’t changed. Demand growth for qualified, high-quality product continues to be extremely challenging for the supply side to meet in the near to medium term. The trend of greater customer demands and tighter product standards continues. The marginal producers continue to have production costs in excess of the current index prices and in addition, we see no strong indications that a pullback in underlying energy storage market demand is imminent or that there have been fundamental changes to the longer term growth trajectory for the lithium industry.
I’d like to go into more detail now on the status of Livent’s multiple ongoing expansion projects on Slide seven. In Argentina, work continues on the company’s two equal 10,000 metric ton phases of lithium carbonate expansion. Construction for the first phase is complete and was finished in line with the timing expectations laid out at the beginning of this year, but the process of commissioning the new units has been slower than we had previously forecast. There are always issues discovered in the transition from construction to early stage commissioning. However, we are finding they are more challenging to resolve when operating in remote regions and especially in jurisdictions where access to specialized skilled labor is limited due to a lack of local talent and challenges in bringing international expats into the country.
In addition, where there are greater controls around imports of replacement parts, such as in Argentina, further delays are taking place. These challenges are not specific to Livent or our production processes. In fact, we don’t even believe it’s limited to the lithium industry as a whole, as lithium expansion projects compete with projects in other sectors, such as oil and gas and mining, the limited manpower, materials and equipment. This delay in our first phase commissioning means that Livent no longer expects incremental expansion volumes to be available for sale in 2023 and this is reflected in our updated guidance. However, we are forecasting a substantial portion of the 10,000 metric tons of capacity to be available in 2024, with the first commercial volume sold in the first quarter.
In addition to this expansion, the second 10,000 ton carbonate expansion phase in Argentina is expecting first commercial volumes to be sold in the second half of 2024. Our lithium hydroxide expansions in the US and China are progressing on track and as previously communicated. The company’s additional 5,000 ton hydroxide unit in Bessemer City, which was completed last year, has been producing material while getting qualified with relevant customers and will ramp up next year alongside the first Argentina carbonate expansion phase. Construction is also well advanced at the 15,000 metric ton hydroxide facility at a new location in the province of Zhejiang, China, with completion targeted for before year-end 2023, which is slightly ahead of schedule.
