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.
Low prices for critical minerals for the green energy transition, such as lithium, cobalt and rare earths, are curbing efforts by the West to fight the dominance of China in the sector, the CEO of US government-backed investment vehicle TechMet said.
Oversupply and weak prices are dampening cashflows of Western start-ups, making it more difficult to compete with a Chinese government investment strategy that takes a long-term view, TechMet CEO Brian Menell said in an interview.
“A lot of the players outside of China are very subject to market moves and sentiment and are therefore slowing down or scrapping projects, but the Chinese are not slowing down their investment,” Menell told Reuters this week at the World Materials Forum in Paris.
The price of lithium for instance has tumbled by more than 80% since the beginning of 2023, while key rare earth neodymium has halved in the same period, mainly due to oversupply.
Both Europe and the United States are seeking to curb their dependence on China, which supplies about 90% of global processed rare earths and two-thirds of processed lithium.
Privately-held TechMet has a valuation of more than $1 billion and has stakes in 10 companies, including Brazilian Nickel, Cornish Lithium and Rainbow Rare Earths.
TechMet plans to use the market weakness to invest in more firms, including those involved in lithium and tin.
“If you have money, it’s a massive opportunity because there’s a lot of short-term stress,” Menell said.
Despite a tough funding environment, TechMet is raising an additional $300 million, which Menell expects to finalize in a matter of months.
Some funds may also have to support existing companies, he added.
“Some of our projects may need more investment from us than we expected because cashflows have been reduced by the low prices.”
The US government’s International Development Finance Corp is one of TechMet’s biggest investors. Other major shareholders are commodity trading house Mercuria and the company’s management.
(By Eric Onstad; Editing by David Holmes)
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