Albemarle, the world’s largest lithium producer, has stated that it is not financially feasible to create a supply chain in North America or Europe that would reduce dependence on China for critical minerals. Kent Masters, the CEO of the US-based company, told the Financial Times that the economics simply do not support shifting the supply of lithium, an essential material for the electric vehicle (EV) industry, to the West. Due to low lithium prices and high operational costs, Masters explained, “the returns are not there” for such a pivot.
Lithium prices have dropped more than 80% since the beginning of last year, driven by a global slowdown in EV sales, a challenging macroeconomic environment, and an oversupply of the metal. Adam Megginson, a senior analyst at Benchmark Mineral Intelligence, noted that current prices do not provide the incentives needed for new market entrants.
The decline in lithium prices challenges Western efforts to establish a domestic supply chain for critical minerals and reduce reliance on China, which controls most of the world’s lithium refining capacity and hosts some of the largest mining companies. Albemarle reported a $1.1 billion quarterly loss earlier this month due to low lithium prices and also reduced its workforce by 6-7% as part of a cost-cutting strategy. Additionally, the company paused plans for a $1.3 billion lithium refinery in South Carolina and scaled back its expansion in Kemerton, Australia.
Albemarle owns the only operating lithium mine in the US, located in Nevada, and is also working on securing permits for a mine in North Carolina. However, Masters stated that the development of this mine would depend on economic conditions at the time. The company plans to reduce its capital expenditures globally next year to between $800 million and $900 million, down from this year’s budget.
The downturn in the lithium market is affecting other producers as well. In August, Piedmont Lithium canceled its $800 million refinery project in Tennessee, and in September, International Battery Metals suspended operations at its Utah lithium plant just two months after production began.
“The gap from China seems to be widening rather than closing,” said Oliver Montique, a trade and supply chain analyst at Eurasia Group. China accounted for 65% of global lithium refining capacity last year and is expected to supply more than half of the world’s lithium through 2040, according to the International Energy Agency.
Some companies are still moving forward, however. Last month, Rio Tinto acquired Arcadium Lithium for $6.7 billion in the largest lithium acquisition to date. Global lithium production is expected to grow by around 24% this year and 21% next year, according to Macquarie, which does not anticipate price recovery until 2027.
Despite the US Inflation Reduction Act’s tax incentives for sourcing non-Chinese materials and boosting domestic production, Albemarle claims that the law has not yet accelerated the development of a supply chain within the minerals sector. Rich Nolan, president of the National Mining Association, called for a more comprehensive approach to increase domestic production, including stockpiling, offtake agreements, and advance market commitments.
In addition to low prices, lithium producers face long permitting processes, labor shortages, and policy uncertainty. Analysts warn that potential changes in US policy, such as efforts to undo the Inflation Reduction Act or reduce EV mandates, could slow EV adoption further and depress lithium prices. Alice Fox, a senior base metals strategist at Macquarie Group, stated that any reduction in demand for lithium would be detrimental to the market.
