U.S. miner Albemarle (NYSE: ALB), the world's top lithium producer, said this week it would temporarily shut two operations due to weaker demand for the commodity used in batteries that power electric vehicles (EVs).
The decision affects portions of the Silver Peak lithium mine in Nevada and Kings Mountain lithium hydroxide production facility in North Carolina starting this September.
The company plans to restart the idled output in early 2021, chief financial officer, Scott Tozier, said on its Aug. 6 earnings conference call.
The announcement came as the company posted a 45% drop in second-quarter profit, which was attributed partially to weak lithium prices caused by oversupply.
Sales fell 12.7% to $283.7 million in the three months to June 30.
Producers of lithium ramped up production amid forecasts of increased demand from EV makers, but the coronavirus pandemic has shifted automakers' plans significantly.
Albemarle has periodically reviewed its expansion plans in the past 12 months. A year ago, it postponed a project to add 125,000 tonnes of processing capacity. It also revised a deal to buy into Australia's Mineral Resources' (ASX: MIN) Wodgina lithium mine and said it would delay building 75,000 tonnes of processing capacity at Kemerton, also in Australia.
The lithium giant showed further signs of distress in May this year, cutting its 2020 budget and pulling its annual forecast as the coronavirus spread around the world.
This is the first concrete sign that the lithium industry is beginning to feel the pain of falling EV sales, which are projected to slide further for the rest of the year due in part to shutdowns affecting carmakers.
Before the pandemic, the main factor behind the price slump was an avalanche of new supply. The glut was triggered mainly by mine expansions and a cut in government subsidies for purchasers of EVs in China, the world's largest market.