Electric vehicle (EV) battery material mines are shutting down as weak demand for EVs and crashing prices make projects financially unviable.
Many investors and experts had predicted that EV sales would grow at an expedited rate in 2023. However, this did not materialize. Although sales in the United States grew last year to 1.2 million units, it was still far off from estimates that predicted 1.6 million units. The prices of key EV battery materials—lithium, nickel, and cobalt—have also come down drastically.
Since January 2023, lithium prices dropped by more than 80 percent and nickel and cobalt by more than 40 percent. With slower-than-expected EV sales and crashing battery material prices, many mines catering to the sector are opting to shut down and curtail operations.
In June 2022, Albemarle, the world’s largest lithium producer, revealed plans to build a lithium-processing plant in the United States. In March 2023, it announced $1.3 billion to construct the plant in South Carolina.
But in January, the company stated that it was planning to defer spending on the project. It also announced that it was laying off workers and would cut down capital spending this year. Albemarle warned in November 2023 that lower lithium prices would dent sales.
During a recent speech to investors, Albemarle CEO Kent Masters said that “where prices are today, the economics aren’t there for those projects,” according to The Wall Street Journal. Construction and engineering activities on the South Carolina work have been paused, he said.
Glencore, the Swiss mining and trading giant, announced recently that it would suspend production at an unprofitable nickel mine and processing plant in the French territory of New Caledonia, an island group in the South Pacific.
BHP, the largest miner in the world by market value, has also said that it may have to shut down its nickel business in Australia for an unspecified period of time, warning that it does not anticipate the market to recover quickly. The company has supply agreements with Ford and Tesla.
Last year, mining concern Chemaf Resources was listed for sale following crashing cobalt prices. The company struggled to finish projects in the Congo.
The closure or suspension of electric battery material mines can have a long-term effect on the supply equation of the EV market. Building mines usually takes several years and maybe even decades. Once they’re closed, reopening them can be a challenging task.
During an interview with Bloomberg, Tom Price, head of commodities strategy at Liberum Capital, said that there was “nothing magical about EV input markets like lithium and cobalt: When their prices collapse, projects and supply are cut—just like any other commodity market.”
Weak EV Demand
The weaker-than-expected EV market has come as a surprise to many automotive firms. A KPMG report published last month found that confidence in electric vehicles among automakers in the United States and other countries had dipped as many are concerned that their large bets in the sector may take longer to pay off.“Just a year ago, executives were excited about the prospects for transforming the industry with new kinds of cars. Now, they remain optimistic, but they are more sober about how difficult it will be to manage the transition and preserve or increase profits,” the report reads.
“While a flood of new EV models is coming to market, demand has weakened and some players may come under extreme pressure as competition intensifies.”
Although 43 percent said they “might consider” such a purchase in the future, 41 percent stated they “would not buy” an EV.
A January 2024 report by price reporting agency Fastmarkets predicted growth to “slow further” this year, which would add more downward pressure on battery materials. Fastmarkets revised its expected EV growth rate for 2024 to 23 percent year-over-year from 36 percent.
“Uncertain economic climate, particularly relatively high interest rates, continue to weigh on buyers’ decisions,” the report reads. “This will be particularly true in markets such as the U.S., where vehicle financing plays a pivotal role in consumer purchases.”
Oversupply of battery materials will result in price weakness for these materials this year, the company stated. At the beginning of 2024, some parts of the battery material industry were in “survival mode,” seeking to cut down costs.
Fastmarkets expects lithium and nickel supplies to be in surplus this year, with cobalt prices remaining under pressure.
“In 2024, the battery materials market will also be exposed to a complex interplay of economic headwinds, geopolitical developments, trade tensions, disruptions to shipping, and the reshaping of international supply chains,” Fastmarkets stated.
“We expect ample supply, bearish prices, and weak market sentiment to deter capital investment in the battery materials market this year.”
