The electric car battery metals industry is experiencing a significant shift from its recent boom to a challenging phase. Major lithium and nickel producers, essential for lithium-ion batteries in electric vehicles, are pausing projects and closing mines in response to plummeting commodity prices and slowing EV sales globally, especially in the U.S. and China.
Charlotte, N.C.-based Albemarle, the world's largest lithium producer by market capitalization, had announced a $1.3 billion investment in a South Carolina plant aimed at processing lithium from various sources, including recycled batteries. This project was seen as a major boon for the state's burgeoning electric vehicle industry. However, less than a year into the announcement, plans were stalled due to a significant drop in battery metal prices, leading Albemarle to delay spending on the project and implement company-wide cost-cutting measures, including layoffs and investment deferrals.
The downturn has seen lithium prices fall by as much as 90%, while nickel prices have also seen a drastic reduction. Glencore recently announced the suspension of production at an unprofitable nickel mine and processing plant in New Caledonia, a key global nickel supplier. Similarly, BHP Group Ltd., facing the market's grim outlook, hinted at a temporary closure of its Australian nickel operations, despite having supply agreements with major automotive companies like Tesla and Ford Motor.
This downturn comes amid weakening momentum for electric car sales and an oversupply of related metals, challenging the industry's growth prospects. Several automakers, including Ford, General Motors, and Volvo, have adopted a cautious stance towards EV market demand, postponing investments. The U.K. business of British electric car maker Arrival filed for bankruptcy, citing tough macroeconomic conditions and market challenges.
Despite these setbacks, some analysts believe the cutbacks have been modest, suggesting a lingering optimism about long-term demand. The electric car revolution continues, albeit at a slower pace than anticipated. The current dip in metals prices could potentially enable car manufacturers to offer more affordable models and discounts, possibly reigniting sales growth. However, a slowdown in mining activities might lead to shortages if demand surges unexpectedly, prompting carmakers to vie for supplies once again.
