Kent Masters, the CEO of Albermarle, the world’s largest lithium producer, has voiced concerns that pivoting away from China for critical mineral supply chains in North America and Europe is economically unfeasible under current market conditions.
“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 risks losing its competitive edge in the lithium market.
Lithium prices have dropped over 80% since early 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 expected to persist through 2040.
A week ago, Albermarle, reported a challenging quarter as low lithium prices, oversupply, and high operational costs continue to weigh on the industry. The company revealed a net loss of US$1.1bn in Q3 2024, a stark contrast to a net income of $US300m for the same period last year.
There were significant cutbacks in response. Plans for a $US1.3bn refinery in South Carolina were paused, and the expansion of the company's Kemerton plant in Western Australia was scaled back. The company has also reduced its global workforce by 6–7% and expects its capital expenditures in 2025 to drop to US$800m–$900m, about half this year’s spending.
Workers at the Kemerton plant, hired to construct the new production trains, were reportedly turned away without warning when cuts were announced. Union representatives have criticised the fallout, describing it as a blow to those who relocated for jobs in South West WA’s lithium industry.
The broader industry has not fared better. Piedmont Lithium (ASX:PLL) cancelled a US$800m 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 from Katana Asset Management cited high wages, regulatory hurdles, and technological limitations as deterrents for global players considering operations in Australia.
Despite the gloomy outlook, some companies have continued to expand. Rio Tinto (ASX:RIO) recently acquired Arcadium Lithium for US$6.7bn, marking the largest lithium acquisition to date. Global mining supply is projected to grow by 24% this year and 21% next year, but analysts predict lithium prices will not recover until 2027.
Uncertainty surrounding incoming President Donald Trump’s policy changes, including his pledge to “end the insane electric vehicle mandate” and revise the IRA could weaken EV adoption and exacerbate price pressures.
