Kent Masters, CEO of Albermarle, the world’s largest lithium producer, expressed concern that moving away from China for critical mining supply chains in North America and Europe is economically unfeasible under current market conditions.
“We were trying to move towards the West… the prices we see in the market don’t allow us to do that,” Masters told the Financial timesadding that the United States risks losing its competitive advantage in the lithium market.
Lithium prices have fallen more than 80% since the start of 2023, driven by lower-than-expected electric vehicle (EV) uptake and global economic challenges, further undermining Western efforts to build domestic supply chains. China currently dominates the global lithium refining market with 65% of capacity, a share that is expected to persist until 2040.
A week ago, Albermarle reported a difficult quarter as low lithium prices, oversupply and high operating costs continue to weigh on the sector. The company revealed a net loss of $1.1 billion in the third quarter of 2024, in stark contrast to a net profit of $300 million for the same period last year.
In response there were significant cuts. Plans for a $1.3 billion refinery in South Carolina have been put on hold and expansion of the Kemerton plant in Western Australia has been scaled back. The company has also reduced its global workforce by 6-7% and expects its capital expenditures in 2025 to fall to $800-900 million, about half of this year’s spending.
Workers at the Kemerton plant, hired to build the new production trains, were reportedly let go without warning when the cuts were announced. Union representatives have criticized the fallout, describing it as a blow to those who have moved to seek work in south-west WA’s lithium industry.
The sector in general has fared no better. Lithium Piedmont (ASX:PLL) canceled an $800 million refinery project in Tennessee, and International Battery Metals suspended operations at a Utah plant just two months after production began. Portfolio manager Romano Sala Tenna of Katana Asset Management cited high salaries, regulatory hurdles and technology limitations as deterrents to global players looking to operate in Australia.
Despite the bleak outlook, some companies continued to expand. Rio Tinto (ASX:RIO) recently acquired Arcadium Lithium for $6.7 billion, marking its largest lithium acquisition to date. Global mineral supply is expected to grow 24% this year and 21% next year, but analysts expect lithium prices not to recover until 2027.
Uncertainty surrounding incoming President Donald Trump’s policy changes, including his promise to “end the crazy EV mandate” and overhaul the IRA, could weaken EV adoption and exacerbate pricing pressures .