Keep knowledgeable with free updates
Merely signal as much as the Commodities myFT Digest — delivered on to your inbox.
Albemarle, the world’s largest lithium producer, says it’s not economically viable to construct a provide chain in North America and Europe that might wrest management of important minerals from China.
Kent Masters, chief govt of the US-based group, advised the Monetary Occasions that the “returns are usually not there” to pivot provide of the commodity, which is essential for the electrical automobile business, to the west due to low lithium costs and excessive working prices.
“We had been attempting to pivot to the west . . . the costs we see available in the market don’t actually enable us to try this,” Masters advised the Monetary Occasions, including that the US was “completely” prone to dropping the race to compete with China on lithium.
Costs for lithium have fallen greater than 80 per cent for the reason that begin of final 12 months, as a worldwide slowdown in electrical automobile gross sales and a troublesome macroeconomic backdrop muted demand for the steel whereas provide continued to develop.
“On the present value degree, new entrants are usually not being incentivised to enter the market,” mentioned Adam Megginson, a senior analyst at Benchmark Mineral Intelligence.
The downturn within the lithium market undermines western efforts to construct a home provide chain for metals essential for the vitality transition and cut back reliance on China, dwelling to the vast majority of the world’s refining capability and a few of the largest mining firms.
Albemarle reported a quarterly lack of $1.1bn earlier this month on low lithium costs and lowered its workforce by 6-7 per cent as a part of its value financial savings plan. Earlier this 12 months, the corporate paused its plans to construct a $1.3bn refinery in South Carolina and partially halted its growth in Kemerton, Australia.
The corporate owns the one working lithium mine within the US in Nevada and is securing permits for a mine in North Carolina. Masters advised the FT that the event of that mine is determined by “what the economics appear like on the time”.
“As soon as we get by means of allowing, we’ll need to decide whether or not we do it,” Masters mentioned. The corporate plans to spend $800mn-$900mn in capital expenditures globally subsequent 12 months, about half of this 12 months’s spending.
The slowdown from Albemarle comes as producers report decrease earnings and pull again on growth plans. In August, Piedmont Lithium scrapped its plans to construct an $800mn refinery in Tennessee. In September, Worldwide Battery Metals suspended operations at its lithium plant in Utah two months after it began manufacturing.
“The hole from China appears to be widening somewhat than getting nearer,” mentioned Oliver Montique, a commerce and provide chains analyst at Eurasia Group.
China made up 65 per cent of the world’s refining capability of lithium final 12 months and is predicted to generate greater than half of the world’s provides by means of 2040, in keeping with the Worldwide Power Company.
Some firms are transferring ahead. Final month, Rio Tinto acquired Arcadium Lithium for $6.7bn, the biggest lithium acquisition on document. International mining provide is predicted to develop about 24 per cent this 12 months and 21 per cent subsequent 12 months, in keeping with Macquarie, which doesn’t count on costs to get well till 2027.
Whereas the US Inflation Discount Act included tax credit to encourage the sourcing of non-Chinese language sourced supplies and home manufacturing, Albemarle says the regulation has not accelerated the buildout of a provide chain right down to the minerals sector.
Wealthy Nolan, president of the Nationwide Mining Affiliation, known as for a “extra aggressive and holistic method” to spice up home manufacturing, together with “stockpiles, offtake backstops, [and] advance market commitments.”
Along with low costs, lithium producers face lengthy allowing timelines, workforce shortages, and coverage uncertainty. Guarantees from incoming president Donald Trump to “finish the insane electrical automobile mandate” within the US and undo the IRA might gradual EV adoption even additional and drive down lithium costs, say analysts.
“Something that modifications or decreases the demand shouldn’t be going to be good,” mentioned Alice Fox, senior base metals strategist at Macquarie Group.
