Lithium and nickel producers are halting projects due to plummeting prices, while the momentum behind electric vehicle sales is slowing down
Last year, when the world’s leading lithium company unveiled plans for a $1.3 billion facility in South Carolina, local authorities celebrated it as a game-changer for the Palmetto State.
The innovative project, spearheaded by Albemarle based in Charlotte, N.C., aimed to process various lithium sources, including recycled batteries, and become a vital supplier for South Carolina’s growing electric vehicle sector.
However, less than a year later, these aspirations have been dampened by a sharp decline in battery metal prices and a slowdown in electric vehicle sales growth in both the U.S. and China. Albemarle has postponed investment in the project as part of broader cost-cutting measures, which also involve layoffs and delays in other ventures.
Lithium and nickel producers, crucial components in lithium-ion batteries for EVs, are also feeling the pinch, pausing projects and shuttering mines to preserve capital following a rapid decline in commodity prices. Lithium prices have plummeted by as much as 90% since last year’s outset, while nickel prices have nearly halved.
Last week, Swiss mining and trading behemoth Glencore announced the suspension of production at an unprofitable nickel mine and processing plant in New Caledonia, a French island group in the Pacific responsible for over 6% of global supply. The company intends to divest its stake in the operation due to high operating costs and a sluggish market.
Shortly after, BHP Group, the world’s largest miner by market value, signaled the potential closure of its Australian nickel business for an unspecified duration, cautioning against expectations of a rapid market rebound. BHP holds supply agreements with Tesla and Ford Motor.
The global market is now inundated with these metals as producers expanded new projects to cater to the burgeoning electric vehicle (EV) industry, which has seen a deceleration in sales momentum.
Several automotive giants, including Ford, General Motors, and Volvo, are postponing investments and adopting a more guarded stance regarding EV consumer demand outlook. Additionally, British electric vehicle manufacturer Arrival’s U.K. division filed for bankruptcy this month, attributing it to challenging macroeconomic and market conditions that hindered product launch timelines.
Fluctuations between boom and bust are a regular feature of metals markets, as demand tends to be volatile and the development of new mines typically requires many years.
Certain analysts view the current scale of cutbacks as relatively restrained, suggesting that some miners may still hold optimistic views regarding longer-term demand.
While the adoption of electric vehicles (EVs) is progressing, it’s not happening as swiftly as previously projected. Substantially lower metal prices could potentially enable automotive companies to stimulate sales growth by offering cheaper models and discounts. However, the slowdown in mining operations poses the risk of metal shortages if demand suddenly surges again, leaving car manufacturers scrambling for supplies.
Many major players in the emerging lithium industry have opted to temporarily halt upcoming projects rather than shutting down existing operations. This decision is supported by substantial cash reserves accumulated in recent years when commodity prices were soaring.
In the established nickel industry, certain miners are finding themselves compelled to shutter unprofitable mines struggling to compete against inexpensive Indonesian exports. This downturn has led to the elimination of over a fifth of Australia’s mine supply, as reported by Benchmark Mineral Intelligence, with the potential for further closures looming.
Australian officials designated nickel as a critical mineral, opening the door for companies to seek government grants.
Some policymakers in the West worry that the current scenario could disrupt recent efforts to diversify critical mineral supply chains away from China, which dominates over half of the world’s lithium refining and has played a key role in Indonesia’s nickel expansion through significant investments. Additionally, there are concerns that global markets may become saturated with metal sourced from low-cost but environmentally damaging mines if producers adhering to stricter standards are priced out of competition.
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