A slowdown in the growth of electric vehicle (EV) demand has led to entire mines being shut down as the supply of rare earth minerals essential for EV components exceeds demand, according to The Wall Street Journal.
Mines around the world are ceasing operations or halting construction projects in response to the falling demand, such as a $1.3 billion plant in North Carolina operated by Albemarle. which announced that it was deferring spending on the project amid the market turmoil, according to the WSJ The total market share of EVs rose from 3.1% in January 2023 to 3.6% in December 2023, while the share of U.S. vehicle inventory grew from 2.8% to 5.7% in that same time frame as demand fails to keep up with supply. (RELATED: California EV Sales Decline For First Time In A Decade As State Continues Green Push)
Over the last few years, global mineral producers have ramped up mining operations in an attempt to capitalize on the emerging EV market, but consumers have declined to adopt EVs at the rate producers were expecting, leading to rare minerals flooding the market and driving down prices, according to the WSJ. The market for metals is often subject to boom-and-bust cycles due to unpredictable demand and the slow speed at which mines can be brought into operation.
The price of lithium is down around 90% since the beginning of last year, and the price of nickel has been cut in half in that same time frame, according to the WSJ. A mine on the French Pacific island of New Caledonia recently suspended operations, despite providing more than 6% of the world’s nickel supply.
A scramble to secure strategic minerals such as copper, cobalt, lithium, and nickel could increase price pressures and raise the cost of the climate transition, IMF economists write in the latest issue of F&D. https://t.co/X72oppqbAe pic.twitter.com/hoqLoenEdb
— IMF (@IMFNews) February 17, 2024
The decline in mineral demand is particularly dire to the Australian mining industry and economy in general, with the country’s government recently designating nickel as a critical mineral to give corporations access to government grants in order to provide some stimulus to struggling companies, according to the WSJ. The collapse of mineral prices has led to a loss of more than one-fifth of Australia’s mine supply.
China controls around 87% of the world’s rare earth mineral refining capacity, leading the U.S. to attempt to subsidize projects outside of China to secure access to the resources. The Biden administration has included provisions in EV tax credits that require a certain percentage of minerals not to be from a foreign entity of concern like China to be eligible.
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