CANBERRA -- Australian lithium producer Liontown has pulled the trigger on expansion plans to boost its output by more than 50% by the 2030s, as the sector responds to stronger prices for the key battery metal even as the longer-term outlook remains mixed.

The company announced Wednesday that it had made a final investment decision on the 389 million Australian dollar ($271 million) expansion of its Kathleen Valley mine in Western Australia, which will lift its output to a targeted five-year average of 780,000 dry metric tons from 2030.

Chief executive Tony Ottaviano said the investment, expected to deliver the first additional material by 2028, would give the company the scale to perform well through the ups and downs of a volatile market.

"We want to maximize Kathleen Valley to its full potential, and that's what this expansion does," he told Nikkei Asia.

The decision is the latest sign of growing confidence in Australia's lithium sector, which mines a third of the world's supply of the key ingredient for cells that power electric vehicles and battery energy storage systems (BESS). The industry was punished during a downturn that accelerated through 2024 and deepened last year, as a supply glut was exacerbated by softer-than-expected growth in EV demand. Prices for spodumene, the lithium-containing material typically mined in Australia, fell to less than $600 per ton, a level below the cost of production for many miners.

prices have risen over the past year, peaking mid-May at $2,935 per ton before weakening somewhat over recent months, with spodumene trading at $1,930 last week.

The recovery has spurred the owners of mines mothballed during the downturn to restart operations and other players to expand Core Lithium, which suspended mining at its Finniss lithium operation in 2024, began producing spodumene again in September and is aiming to make its first post-restart shipments soon.

Director Paul Brown told Nikkei Asia the last two years "had been a journey" as the team worked to secure funding and reduce operational costs.

He said its costs were now around $550 per ton, based on moving from the higher-cost open-pit Grants deposit to the underground BP33 mine.

"Grants is a fantastic near-term cash flow opportunity for us, especially at $2,000 a ton, but nevertheless, we're fully funded to go on and develop BP33 and the rest of the project to its nameplate," he said, referring to the mine's annual maximum production rate, which for Finniss is 214,000 tons.

To fund the restart, the company undertook a $AU120 million equity raise earlier this year and secured $120 million in debt financing from a group that included the European infrastructure fund InfraVia, U.S. mining credit provider Nebari, and Anglo-Swiss resource trading giant Glencore.

Glencore, the world's largest mining company by revenue, is also finding buyers for the company's spodumene concentrate.

Brown pointed to the increased demand for BESS as a positive sign for the sector's outlook. He said battery supply chains were "much more mature" than during the previous boom. "The actual supply chain is far more robust than what it was for the previous cycle," he said. "The cell manufacturers are far more sophisticated.

The capital's been spent. They're very deployable now." Near-term forecasts for the market have varied, reflecting the fine balance between supply and demand. In August, investment bank UBS tempered its price predictions for 2027, saying the "tight" market would once again enter a surplus, where supply outstrips demand. It revised down previous forecasts for spodumene from $3,750 a ton for 2027 to just under $2,500, although it predicted a short-term rally over the coming months on seasonal demand.

Among the reasons for its outlook shift, it cited a "stronger than initially expected" supply response, an overbuild of batteries in China, weak electric vehicle sales and less supportive government policy.

China this month restored a 2% consumption tax on lithium-ion batteries after a decade-long exemption. The rate will increase to 4% from September 2027.

Price reporting agency Benchmark Minerals Intelligence (BMI) has upwardly revised its demand outlook, driven by a surge in BESS production centered in China. Although its base forecast for 2027 prices in August was $2,525 a ton for spodumene -- up 24% on its previous month's forecast -- it predicted the market would remain in deficit, where demand outstrips supply, until turning to surplus in 2028.

Both UBS and BMI see surpluses persisting through to around 2032, but forecast prices will remain relatively stable.

BMI lithium analyst Cameron Perks said that while the market could still experience swings, it appeared prices would remain range-bound, potentially avoiding the heavy troughs that have characterized recent years.

Liontown's Ottaviano pointed to low inventory levels in China that would provide a boost for miners as buyers restocked.

"The market at the moment is very tightly situated," the executive said. "So it doesn't take much for it to swing from oversupply to undersupplied." He said the company, which started mining during the "lithium winter" -- forcing the team to redesign its mine plan, defer spending and preserve cash -- was confident its expansion would pay off.

"We designed it in a way that we can execute it very flexibly, and therefore incrementally deliver the production," Ottaviano said. "Should the market turn, we've demonstrated to the market we know the levers to pull."