Battery Metals

European makers of stainless steel are turning to Indonesia for nickel as the country’s booming output forces plants in other countries to shutter.

Exports to Europe of Indonesian nickel pig iron — an ingredient for stainless steel used primarily by Chinese producers — to Europe have surged to 87,485 tons this year from just 1,006 tons in 2023, according to Indonesian government data. The Netherlands, Italy and the UK have taken the shipments, the data show.

The swelling exports reflect Indonesia’s growing dominance of the nickel market, with its output now accounting for more than half of the world’s total. European mills typically use ferronickel, a higher-purity alloy than nickel pig iron, but many plants that make it have shut down due to competition from Indonesia.

Those include plants in New Caledonia and the Dominican Republic, which were formerly significant exporters of ferronickel to Europe. Meanwhile, imports from Russia, formerly a major supplier of purer forms of nickel also used for stainless steel, have been curtailed since the invasion of Ukraine in 2022.

That’s a headache for European stainless-steel producers trying to source the metal without sacrificing their green credentials. Indonesia’s nickel industry has been criticized for its association with environmental destruction, lax safety standards, and high carbon intensity, which has deterred some companies from buying it.

Producers shipping nickel products from Indonesia to Europe include Gunbuster Nickel Industry, owned by China’s ailing Jiangsu Delong Nickel Industry Co., and local firm PT Trimegah Bangun Persada, better known as Harita Nickel, according to people familiar with the matter.

Lukito Gozali, head of investor relations at Harita Nickel, said the firm was always open to the opportunities to work with customers globally. A spokesperson for Gunbuster Nickel Industry didn’t respond to an emailed request for comment.

China’s economic woes could also be undermining demand for the metal and driving shipments to Europe as producers are forced to diversify. Asia’s largest economy has long bought the lion’s share of Indonesia’s nickel, but consumption of stainless steel there is flagging due to its struggling property and industrial sectors.

China’s CATL, the world’s biggest maker of EV batteries, is considering whether to mothball a key lepidolite mine in the south-eastern Jiangxi province, as well as one of its three lithium carbonate production lines, according to a research report published on Wednesday by Citi.

Falling lithium prices have affected the cost-benefit equation of producing lithium worldwide, particularly at CATL’s large mine in the Jiangxi province. The asset holds vast amounts of lepidolite, a hard rock ore that is relatively expensive for producing lithium.

The move will reduce China’s monthly lithium carbonate output by 8% and “will help rebalance the supply with demand,” UBS analysts led by Sky Han wrote in a note on Wednesday.

“We have believed said production has been underwater for many months, but that downstream cathode/battery production has been in the money, so the mining has continued,” BMO analyst Joel Jackson wrote on Wednesday.

“Some lepidolite production has already come off before from other producers, and we believe companies like Ganfeng stopped looking at investing in lepidolite earlier this year. However, this is the first incremental news we’ve seen in some time, and CATL is downstream integrated, so this is noteworthy in our opinion,” Jackson said.

Analysts estimate it costs between 80,000 yuan ($11,230) and 120,000 yuan ($16,860) to produce one tonne of lithium carbonate equivalent (LCE) from lepidolite in China, while extracting the same amount from brine deposits or spodumene costs between 40,000 yuan and 60,000 yuan.

Despite the cost disadvantage, lepidolite mines in Jiangxi are more accessible than the brine lakes on China’s western plateaus and the spodumene rock in southwestern Sichuan province.

Rystad Energy consultancy sharply reduced in March its forecast for China’s lithium mining output growth this year, down to 12% from an earlier projection of 54%. This downward revision was primarily attributed to the slowdown in lepidolite mining.

Globally, Rystad anticipates 27% growth in mined lithium output, down from its previous estimate of 42%.

Nearly half of China’s lithium production last year came from lepidolite, according pricing agency Fastmarkets. The use of the lithium-bearing ore has surged in recent years, with output more than doubling to 114,500 tonnes of LCE over the past two years.

Swedish battery maker Northvolt AB is working to halt a financial tailspin by pausing some production at its flagship factory and cutting jobs as it comes to grips with operational difficulties and a drop in demand for electric vehicles.

The initial steps of its strategic review also include seeking partners for facilities in Poland, Northvolt said Monday in a statement, without specifying the size of any workforce reductions from among its about 6,000 staff. The company has sold a Swedish site it had previously planned for making cathode material, a precursor to manufacturing batteries.

“We are having to take some tough actions for the purpose of securing the foundations of Northvolt’s operations to improve our financial stability and strengthen our operational performance,” chief executive officer Peter Carlsson said.

The company is pausing operations at its Northvolt Ett Upstream 1 cathode material production facility until further notice, according to the statement.

Northvolt, the continent’s biggest homegrown battery manufacturer, has struggled to ramp up production at its main factory outside the town of Skelleftea near the Arctic Circle. It already pushed back plans for an initial public offering to next year because of a challenging market and the operational problems.

The market for battery makers continues to worsen amid a slump in EV sales. Companies including Volkswagen AG, Stellantis NV and Mercedes-Benz Group AG have had to scale back or refocus battery projects this year.

Northvolt said it remains committed to its facilities NOVO in Sweden, Northvolt Drei in Germany and Northvolt Six in Canada and is in close dialog with the key stakeholders.

Potential revisions to those projects’ timelines will be confirmed during the fall, along with any further cost-saving actions, the company said.

Northvolt’s main site delivered its first batteries in May 2022, but scaling up production has been far from smooth. BMW AG backed out of a €2 billion ($2.2 billion) order in June, while Volkswagen’s Scania complained of slow deliveries earlier this year.

There’s also been a sharp decline in electric vehicle sales in Europe as there aren’t enough affordable models to move past early adopters and the wealthy, and reduced government incentives have further sapped customer interest. The EVs that are sold are increasingly Chinese — or American — with BYD Co. and Tesla Inc. selling more than local manufacturers combined.

Northvolt, founded by two former Tesla managers about eight years ago, counted Volkswagen as its biggest individual owner at the end of last year, with a 21% stake, while funds managed by Goldman Sachs Asset Management had about 19%. Vargas Holding AB of Harald Mix had about 7% and Northvolt managers and staff a combined about 9%, according to its 2023 annual report.

Earlier on Monday, a long-awaited report by former European Central Bank President Mario Draghi on European Union competitiveness drew on the automotive sector for particular scorn. The bloc faces a real risk that EU carmakers continue to lose market share to China, which is ahead of the 27-member bloc in “virtually all domains,” while producing at a lower cost, the report said, calling the industry a “key example of a lack of EU planning.”

Northvolt, a key battery producer for Europe’s electric vehicle industry, announced Monday that it plans to cut jobs, shut down one of its sites, and enter into discussions with partners and investors to secure the future of a facility in Poland.

Based in Stockholm, Sweden, Northvolt is one of Europe’s most valuable privately-held tech firms that builds lithium-ion batteries for the electric vehicle industry. It has partnerships with a number of major European automakers, including Volkswagen and Volvo.

Following a strategic review of its business, Northvolt said it had to take “some difficult decisions on the size of our workforce to match the needs of a reduced scale of operations.”

The firm did not disclose details on how many jobs would be affected, stating: “No final decisions have been made on the precise nature of any resizing.”

“We remain in constructive discussions with the unions, and will ensure that every effort is made to minimize the need for redundancies,” the company said in a statement.

The battery maker cited a “challenging macroeconomic environment and our subsequent reassessment of Northvolt’s near-term priorities” as the key reasons behind its decision to embark on the cost-cutting drive.

“As difficult as this will be, focussing on what is our core business paves the way for us to build a strong long-term foundation for growth that contributes to the Western ambitions to establish a homegrown battery industry,” Peter Carlsson, Northvolt’s CEO and co-founder, said in the statement.

Northvolt has faced a litany of pressures in recent months — not least the demand challenges facing the broader electric vehicle industry.

In Europe, registrations of electric vehicles declined 3% year-over-year in the month of May, according to data released by the European Alternative Fuels Observatory in July. Registrations of plug-in hybrids, meanwhile, declined 10% year-over-year, to 226,000.

Northvolt has also faced pressures to deliver on lofty production goals. In June, the firm was dealt a significant setback when BMW, previously a key partner, canceled a deal worth 2 billion euros for the delivery of EV batteries starting from 2024.

BMW said at the time that the deal had been cancelled due to Northvolt being unable to deliver on time.

In addition to making redundancies, Northvolt is also consolidating several of its key battery-making operations across Europe.

In the northern Swedish city of Skellefteå, Northvolt said that its cathode active material production facility, Northvolt Ett Upstream 1, would be placed “into care and maintenance until further notice” to streamline operating costs and optimize the sequencing of a ramp-up in production.

The company’s Northvolt Fem program in the town of Kvarnsveden in Borlänge, Sweden will be terminated, Northvolt said. The company said it had already agreed a sale of the site, which it acquired in 2022, to an unnamed buyer.

In Gdańsk, a city in Poland, meanwhile, Northvolt said it would enter into discussions with potential partners and investors about Northvolt Systems, suggesting either a partial or full sale of the division.

Northvolt Systems, which includes the battery systems production site Northvolt Dwa, is fully owned by the firm.

In the U.S., Northvolt said that it has communicated its intention to integrate its California-based subsidiary Cuberg and lithium metal technology into its Northvolt Labs unit in Sweden.

Northvolt, which was last valued privately by investors at $12 billion, is backed by several notable blue-chip investors.

Backers include BlackRock, the world’s largest asset manager, Goldman Sachs, Volkswagen, Baillie Gifford, an early Tesla investor, and Singaporean sovereign wealth fund GIC.

The company is viewed as a key IPO candidate in Europe’s tech ecosystem.

Early last year, Reuters, citing four unnamed sources, reported that the firm was preparing for a stock market listing that could value the company at north of $20 billion.

CNBC was unable to independently verify the report. Northvolt was not immediately available for comment when contacted by CNBC.