Slow EV sales are proving problematic for Australia’s lithium miners

Plummeting lithium prices have wreaked havoc on the Australian mining sector, as slow electric vehicle (EV) sales see supply exceed demand. Eve Thomas reports on the industry’s response.

Manufacturing of lithium-ion cells for EV batteries. Credit: Shutterstock/IM Imagery

Lithium – a battery mineral essential to the clean energy transition – experienced a price plummet of 80% in 2023, with slow EV sales contributing to the drop.

Mining companies are reducing production following the decline, and Australian mining is taking a particularly significant hit. The decline is translating into job losses, tighter budgets and the pausing of operations for several major companies, as they look to protect balance sheets.

“In response to lower than anticipated EV demand, lithium producers are curtailing production levels,” explained GlobalData analyst Isabel Al-Dhahir. “The slowdown in lithium mining is particularly evident in Australia, the world’s largest lithium producer.

“The decision by the likes of Albemarle, Core Lithium and Liontown to cut back on production and, in some locations, pause operations altogether, will have adverse consequences. Investment into Australia’s mining sector is likely to take a hit and mining companies may struggle as production levels fall below a profitable threshold.”

The impact of lithium prices on Australian mining

In its quarterly report, Core Lithium said it would cut “a number of roles” while Albemarle reported that it would reduce project spending and costs. Meanwhile, Pilbara Minerals stated in its quarterly report that the company would reduce its annual exploration spend by up to A$100m ($66m) and was unlikely to pay a dividend for the half-year ending December 31.

The difficulties faced by the sector prompted a recent recommendation from the International Association for Measurement and Evaluation of Communication (AMEC) that the government defer all royalties, reform the environmental approval process, and provide funding for shared infrastructure.

Al-Dhahir is confident that the situation correlates directly with the EV scene, but she expects that the market will see movement.

“Although the lithium mining sector is currently volatile, it is not expected to impact Australia in the long term,” she said. “The demand for electric vehicles is expected to pick up again as charging infrastructure becomes more developed and EV prices fall.

“Additionally, the EV market is expected to benefit from EU legislation banning the sale of new combustion cars from 2035. Similar legislation is being discussed in the US with the Biden administration aiming for 50% of new car sales to be electric by 2030.”

Noting the impact of legislation, while considering the correlation between the recent UK shift and the slowing demand, Carwow managing editor Paul Barker told Mining Technology: “In a flash survey we conducted the day after the government’s announcement of the delay to the 2030 ban, 41% of customers said they were now less likely to buy an EV in the next year as a direct result of the change to 2035.”

Chinese EV market success, European struggles

Explaining where the market is seeing success, and where it is struggling, GlobalData analyst and director of Global Powertrain Al Bedwell said: “China’s very strong battery electric vehicles (BEV) wholesale market of 825,000 units in December led to stronger than expected global BEV growth for the year, but the situation in other major markets is less satisfactory.”

According to GlobalData’s findings, China is seeing high levels of BEV exports, having exported 1.1 million units during 2023. China has also seen growth in its plug-in hybrid electric vehicles (PHEV) sales, which – when combined with US success – saw the sector achieve over 60% YoY increase.

However, in Europe, Bedwell noted: “Anecdotal evidence suggests that BEV vehicle stocks in sales channels are building and BEV component suppliers report idling production lines in some cases as incoming orders fail to meet expectations. Germany’s mid-December snap decision to delete its BEV grant to private buyers has not helped the situation and has led to some brands seeing virtually no growth in 2023 over 2022.

“Overall, the BEV market grew by 32% in 2023 but the H2 result was just 22% as momentum drained away in the face of falling consumer disposable income and a better supply of more affordable (than BEV) choices. There is considerable concern over the state of Europe’s BEV market and all the makings of a price war in 2024, despite some OEMs saying they won’t go down that route. There may be little choice in the end.”

Why are EV sales low, and will lithium prices recover?

Despite being heralded as the ‘white gold’ that will streamline the energy transition, the lithium market has run into trouble, and Australia’s mining sector has taken a consequential hit.

“Negative press coverage doesn’t help the EV cause, spreading fear, uncertainty and doubt,” said Barker. “We know that the shift from the 2030 ban affected consumer attitudes towards purchasing an EV, with many saying they were now less likely to buy one as a result of the five-year delay.”

Speaking on the UK, Barker continued: “The Government needs to encourage further investment to improve the existing public charging infrastructure. We need to see a marked increase in the number of installations and the speed of grid connections.”

However, the outlook is overall positive. Carwow’s recent data found that 80% of drivers are considering an EV as their next car while Bedwell considered that the BEV market is “bumpy rather than failing”.

Noting that “legacy OEMs can’t afford to get left behind in the BEV race”, he stated that “analysis of the European used BEV market, where affordability is better, is encouraging and points towards solid underlying demand for BEVs when the price is right.”

If the EV demand grows, Australia’s mining sector will find a correlating recovery. Pilbara Minerals voiced its optimism in its recent report, stating that “the long-term outlook for lithium remains strong based on compounding growth in EV production and other energy storage applications”. It remains “positioned to take advantage of an improvement in market conditions when the pricing cycle turns”.