A year after battery metals were the investment everyone was excited about, the boom has been turned into a bust. We’re witnessing a crash in battery metal prices, undercut by a slowdown in electric vehicle (EV) sales growth in the US and China. Battery metal companies have deferred spending on projects amid companywide cost-cutting that includes layoffs and delays.
Producers of lithium and nickel, which are used in lithium-ion batteries for EVs, have been stalling projects and closing mines to save cash after a painfully quick fall in commodity prices. Prices of lithium are down as much as 90% since the start of last year, while the price of nickel has roughly halved.
A couple of weeks ago Swiss mining and trading giant, Glencore said production would be suspended at an unprofitable nickel mine and processing plant in New Caledonia, which provides more than 6% of the world’s supply. It will seek a buyer for its stake in the operation, a decision the company attributed to high operating costs and a weak market.
Days later, BHP, the world’s biggest miner by market value, said it may need to close its Australian nickel business for an unspecified period, cautioning that it doesn’t anticipate a quick market recovery. BHP said it would take an A$5.4 billion impairment charge on its Nickel West division and could suspend operations at a unit that employs more than 3,000 people in Western Australia. BHP has supply deals with Tesla and Ford Motor.
Source: FT
The world is suddenly awash with the metals after producers ramped up new projects to feed the global EV industry as sales of the vehicles have been losing momentum. Several automakers, including Ford, General Motors and Volvo, are delaying investments and striking a more cautious tone about the outlook for EV consumer demand. A British EV maker filed for bankruptcy this month, citing challenging macroeconomic and market conditions that delayed its products getting to market.
Boom-and-bust cycles are commonplace in metals markets, given demand can be unpredictable and new mines typically take many years to develop.
EV adoption is happening, just not as fast as anticipated, and sharply lower metal prices could help automotive companies reignite sales growth by luring buyers with cheaper models and discounts. The mining slowdown risks shortages of the metals if demand quickly heats up, once again leaving carmakers scrambling for supplies.
The Australian government has designated nickel as a critical mineral, a move that will allow companies the opportunity to apply for government grants. Canberra’s intervention underlines mounting concern from global governments that a glut of low-cost nickel from Indonesia, where the industry is dominated by Chinese producers, is forcing mines to close and reducing self-sufficiency in supply chains for growing low-carbon industries.
Australia’s nickel industry in particular has been hit by the influx of Indonesian nickel supply, putting thousands of jobs at risk in Australia as miners including IGO, First Quantum and Andrew Forrest-backed Wyloo have pulled back investment or suspended operations.
Some commentators fear the current situation will derail efforts to diversify critical mineral supply chains away from China, which refines more than half the world’s lithium and has spearheaded Indonesia’s nickel boom with big investments. Officials also have concerns that global markets will be full of metal from low-cost but high-polluting mines if producers with stricter standards are priced out.
As the old market players well know, commodity markets are not only difficult to read, but even harder to accurately forecast.
Source: Trading Economics
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