Lithium producer says west can’t finish reliance on China in essential minerals | USAEMALL.com

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Albemarle, the world’s largest lithium producer, says it is not economically viable to build a supply chain in North America and Europe that could wrest control of critical minerals from China.

Kent Masters, chief executive of the US-based group, told the Financial Times that the “returns are not there” to pivot supply of the commodity, which is crucial for the electric vehicle industry, to the west because of low lithium prices and high operating costs.

“We were trying to pivot to the west . . . the prices we see in the market don’t really allow us to do that,” Masters told the Financial Times, adding that the US was “absolutely” at risk of losing the race to compete with China on lithium.

Prices for lithium have fallen more than 80 per cent since the start of last year, as a global slowdown in electric vehicle sales and a tough macroeconomic backdrop muted demand for the metal while supply continued to grow.

“At the current price level, new entrants are not being incentivised to enter the market,” said Adam Megginson, a senior analyst at Benchmark Mineral Intelligence.

The downturn in the lithium market undermines western efforts to build a domestic supply chain for metals crucial for the energy transition and reduce reliance on China, home to the majority of the world’s refining capacity and some of the largest mining companies.

Albemarle reported a quarterly loss of $1.1bn earlier this month on low lithium prices and reduced its workforce by 6-7 per cent as part of its cost savings plan. Earlier this year, the company paused its plans to build a $1.3bn refinery in South Carolina and partially halted its expansion in Kemerton, Australia.

The company owns the only operating lithium mine in the US in Nevada and is securing permits for a mine in North Carolina. Masters told the FT that the development of that mine depends on “what the economics look like at the time”.

“Once we get through permitting, we’ll have to make a decision whether we do it,” Masters said. The company plans to spend $800mn-$900mn in capital expenditures globally next year, about half of this year’s spending.

The slowdown from Albemarle comes as producers report lower profits and pull back on expansion plans. In August, Piedmont Lithium scrapped its plans to build an $800mn refinery in Tennessee. In September, International Battery Metals suspended operations at its lithium plant in Utah two months after it started production.

“The gap from China seems to be widening rather than getting closer,” said Oliver Montique, a trade and supply chains analyst at Eurasia Group.

China made up 65 per cent of the world’s refining capacity of lithium last year and is expected to generate more than half of the world’s supplies through 2040, according to the International Energy Agency.

Some companies are moving forward. Last month, Rio Tinto acquired Arcadium Lithium for $6.7bn, the largest lithium acquisition on record. Global mining supply is expected to grow about 24 per cent this year and 21 per cent next year, according to Macquarie, which does not expect prices to recover until 2027.

While the US Inflation Reduction Act included tax credits to encourage the sourcing of non-Chinese sourced materials and domestic production, Albemarle says the law has not accelerated the buildout of a supply chain down to the minerals sector.

Rich Nolan, president of the National Mining Association, called for a “more aggressive and holistic approach” to boost domestic production, including “stockpiles, offtake backstops, [and] advance market commitments.”

In addition to low prices, lithium producers face long permitting timelines, workforce shortages, and policy uncertainty. Promises from incoming president Donald Trump to “end the insane electric vehicle mandate” in the US and undo the IRA could slow EV adoption even further and drive down lithium prices, say analysts.

“Anything that changes or decreases the demand is not going to be good,” said Alice Fox, senior base metals strategist at Macquarie Group.