A wave of cost-cutting measures and potential consolidation looms over lithium and nickel miners in the year ahead, as a challenging earnings season signals no short-term relief for the key battery metals sector. Three major Australian-based lithium miners—PLS Ltd. (formerly Pilbara Minerals), IGO Ltd., and Mineral Resources Ltd.—reported their largest first-half losses in over six years, with none offering dividends to shareholders.
Similarly, Nickel Industries Ltd. posted a $169 million loss for the year, despite operating low-cost mines in Indonesia. South32 Ltd. revealed it is considering the divestment of its nickel project in Colombia as part of broader strategic adjustments.
The poor financial performance is in line with a significant downturn in prices for both lithium and nickel. Lithium prices have plummeted by over 80% since 2022, while nickel prices have halved since the beginning of 2023.
The ongoing global price collapse, combined with inflation and rising operational costs, has forced miners into a new era of capital discipline, according to Wood Mackenzie Ltd. analyst James Whiteside. He predicts that the market could see increased consolidation through mergers and acquisitions as miners struggle to stay profitable.
“Both the nickel and lithium markets are likely to remain in oversupply until the end of the decade,” Whiteside stated. “Many producers are burning cash, so any non-essential expenditures will be curtailed.”
This sentiment is echoed by Richard Knights, an analyst at Barrenjoey Markets Ltd., who noted that the industry has been operating on thin margins since the decline in lithium and nickel prices. “Everyone is trying to run these projects as efficiently as possible,” Knights remarked.
The lithium market, in particular, has failed to recover from a crash attributed to softer demand for electric vehicles and oversupply. Miners quickly ramped up production in 2022, but the market’s correction has led several companies to scale back output, shut down mines, or pause expansion projects.
Chinese lithium giants Tianqi Lithium Corp. and Ganfeng Lithium Group Co. have yet to release their full-year results but have already reported significant preliminary losses of $1.1 billion and $152 million, respectively.
In the nickel market, Indonesia’s recent boom has put pressure on Western miners. Nickel Industries, despite operating in Indonesia alongside partner Tsingshan Holding Group Co., was not immune to the price slump. The company reported a $205 million impairment linked to low prices, warning that prolonged low margins could lead to further impairments.
Nickel Industries Managing Director Justin Werner described the current environment as “very challenging,” with “multi-year lows” across the nickel market.
With lower enterprise values for lithium and nickel companies, there may be opportunities for acquisitions as prices remain subdued. Rio Tinto’s purchase of Arcadium Lithium Plc. last year is one example of ongoing consolidation. Barrenjoey’s Knights suggests that further mergers and acquisitions are likely, particularly in the lithium sector.
“M&A activity tends to rise during periods of price stability,” noted Wood Mackenzie’s Whiteside. “There could be a window of opportunity for deals to be completed,” he added, emphasizing that “it’s cheaper to buy than to build in nickel at current valuations.”
Related topic:
Pilbara Minerals Reports Loss, Sees Recovery as CATL Restarts in China
Mitsui Invests $5.3 Billion in Australian Iron Ore Project
Calibre Mining Expands Discovery at Valentine Gold Mine in Newfoundland
