Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Albemarle (NYSE: ALB) said on Wednesday it would cut jobs and defer spending on projects, including a massive refinery project in South Carolina, as part of a wide-ranging plan to slash costs in light of falling lithium prices.
The world’s top producer of the battery metal said it plans to spend $1.6 billion to $1.8 billion in 2024, down from about $2.1 billion it invested last year.
“The actions we are taking allow us to advance near-term growth and preserve future opportunities as we navigate the dynamics of our key end-markets,” chief executive Kent Masters said in the statement. “The long-term fundamentals for our business are strong and we remain committed to operating in a safe and sustainable manner.”
The US-based lithium producer noted it would finish the commissioning of several lithium refineries in China and Australia, which are almost fully built. The company also said it would focused on securing the necessary permits to reopen its Kings Mountain lithium mine in North Carolina.
The asset contains one of the few known hard rock lithium deposits in the US. According to Albemarle, the operation would feed sufficient material for 50 kt LCE of conversion capacity and support the manufacturing about 1.2 million electric vehicles a year initially.
In all, Albemarle expects to save $95 million annually with the measures announced today, of which $50 million will come this year.
The number of people expected to be laid off because of these measures was not disclosed.
Supply of the battery metal over the past year outpaced demand, causing an oversupply that caused a collapse in prices last year.
While lithium prices vary by region and type, most indexes, including the one tracked by Fastmarkets and Benchmark Mineral Intelligence, have dropped by more than 80% over the past year.
Experts expect prices for the lightweight material, key for making the batteries that power EVs and high-tech devices, to keep dropping.
Lithium carbonate fell by 1.05% on Wednesday on the Shangai Metals Market, closing at 103,800 yuan per tonne or about $14,556 per tonne. This represents a nearly 11% price plunge over the past month alone.
The lithium giant is also seeking to sell its stake in Australia’s Liontown Resources (ASX: LTR) after billionaire Gina Rinehart’s company Hancock Prospecting blocked in October its A$6.6 billion ($4.3bn at today’s rates) takeover bid.
Albemarle has priced the roughly 96 million shares it holds in the Australian lithium developer at around A$121 million in a block trade run by JPMorgan, a term sheet showed on Wednesday.
The offer price of A$1.26 to A$1.32 per share is a discount of 7.4%-2.9% to Liontown’s last traded price of A$1.36 on Wednesday. Shares had closed as high as A$3 in the days prior to Albemarle’s bid withdrawal.
Perth-based Liontown confirmed Albemarle’s intentions to local media. The company owns one of the most promising early-stage lithium projects in Australia, Kathleen Valley, located 680 km north-east of Perth in Western Australia’s premier mining district.
Kathleen Valley is considered one of the world’s largest and highest-grade hard rock lithium deposits with a mineral resource estimated at 156 million tonnes at 1.4% lithium oxide and 130ppm tantalum oxide.
The project, on track to begin commercial production in mid-2024, is forecast to initially produce around 500,000 tonnes a year of spodumene concentrate expanding to 700,000 tonnes annually in six years.
Liontown already has supply agreements with Tesla and Ford Motor, as well as with South Korean-based LG Energy Solution.
Hancock Prospecting is now the lithium junior’s largest shareholder with a 19.9% stake.
Rinehart owns shares in other lithium producers such as Patriot Battery Metals (ASX, TSX: PMT) and Delta Lithium (ASX: DLI), but the main focus of her investment is iron ore.
