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The industry that makes materials in electric car batteries — vital for the energy transition — is ripe for consolidation as fierce Chinese competition threatens western rivals, one of Europe’s top producers has warned.
Bart Sap, the boss of Belgian-based multinational Umicore, which makes materials used in cathodes, said he was hunting for deals and partnerships that would bolster the group’s struggling batteries business.
“We’re looking at all angles to recover value in this business because we’ve destroyed value over the last years,” Sap told the Financial Times.
“The industry is ready for consolidation . . . We are actively exploring partnerships” in the battery materials space, he added. “We’ve seen there’s an interest [in deals] in the industry in general.”
Umicore’s shares have plunged more than 50 per cent in the past year, and last month the company slashed its battery cathode materials capital expenditure by 50 per cent as part of a strategy reset.
It has also been forced to delay plans for a battery recycling plant in Europe and a battery materials plant in Canada. This followed a €1.6bn impairment on its battery materials business last year.
The company has been hit hard by a slowdown in the electric car market and the rapid growth of Chinese cathode materials, an essential and expensive part of an EV battery.
As well as Umicore, China’s dominance has put pressure on western groups such as Germany’s BASF, which have to contend with low-priced Chinese material, analysts said.
A surplus of manufacturing capacity, mainly from China, has triggered a fall in capacity rates at plants. Some in the industry were operating at 30-40 per cent of full capacity, Sap said. They typically needed rates of about 75-80 per cent to get good returns, he added.
Even in China, some smaller producers were “dropping out or running their facilities at 10 per cent utilisation . . . Consolidation in the market will happen,” said Evan Hartley of data provider Benchmark Mineral Intelligence.
China controls more than 80 per cent of the market in cathode active materials, one of a battery’s two electrodes, having rapidly built out manufacturing capacity, according to S&P Global Mobility.
“There was an obscene amount of capacity that came online in China in the past few years . . . It’s enormous,” said Hartley.
Jason Ying, commodity strategist at BNP Paribas, said despite the EV slowdown global cathode material capacity would continue to grow this decade, “led by Chinese projects”.
The cathode material market is one example of the west’s reliance on China for supply chains essential to a range of core sectors.
Industrial groups needed European policymakers to set out clear policies for the long term to help the sector “to avoid over-dependency on other regions,” Sap said.
