The closure of battery mines due to declining electric vehicle (EV) demand has sent shockwaves throughout the industry. Lithium prices have plummeted by over 80 percent, while nickel and cobalt have declined by more than 40 percent. This sharp decline in prices has made many projects financially unviable, leading mines to shut down and curtail operations.
Investors and experts had predicted a rapid growth in EV sales by 2023, but unfortunately, this did not materialize. While sales in the United States did increase last year to 1.2 million units, it fell short of the estimated 1.6 million units. The weaker-than-expected EV market has caught many automotive firms off guard. A recent KPMG report revealed that confidence in EVs among automakers has dipped as they are concerned about the profitability of their investments in the sector.
The decline in EV sales has also resulted in crashing prices for key battery materials such as lithium, nickel, and cobalt. Since January 2023, lithium prices have dropped over 80 percent, while nickel and cobalt have declined by more than 40 percent. This has had a significant impact on mines catering to the EV sector, with many opting to shut down and suspend production.
Albemarle, the world’s largest lithium producer, had previously announced plans to build a lithium-processing plant in the United States. However, due to the current economic climate, the company has decided to defer spending on the project and lay off workers. Glencore, the Swiss mining and trading giant, has also suspended production at an unprofitable nickel mine and processing plant in New Caledonia. BHP, the largest miner in the world, has warned that it may have to shut down its nickel business in Australia for an unspecified period of time.
The closure or suspension of electric battery material mines can have long-term consequences for the EV market’s supply equation. Building mines typically takes several years, and reopening them can be a challenging task. This situation highlights the need for a careful balance between supply and demand in the EV market.
A survey conducted by Gallup last year revealed that most Americans are not completely sold on EVs. Only 12 percent of respondents said they were seriously considering buying an EV, while 41 percent stated they would not buy one. This lack of consumer interest, coupled with uncertain economic conditions and relatively high interest rates, has contributed to the weak demand for EVs.
Price reporting agency Fastmarkets predicts that the growth of the EV market will continue to slow this year, adding more downward pressure on battery materials. An oversupply of lithium and nickel is expected, with cobalt prices remaining under pressure. The uncertain economic climate, geopolitical developments, trade tensions, disruptions to shipping, and the reshaping of international supply chains will all play a role in shaping the battery materials market in 2024.
In conclusion, the closure of battery mines due to declining EV demand has had a significant impact on the industry. Crashing prices for key battery materials and weak sales have led to mines shutting down and suspending operations. This situation has caught many automakers off guard and has raised concerns about the profitability of their investments in the EV sector. The future of the EV market remains uncertain, with factors such as consumer interest, economic conditions, and supply chain disruptions playing a pivotal role in shaping the industry moving forward.
