[소재] Rio Tinto struck a deal to acquire Arcadium Lithium for $6.7 billion(9.8조원)

출처 : BatteryIndustry

출처 : BatteryIndustry

Rio Tinto recently struck a deal to acquire Arcadium Lithium for $6.7 billion. The acquisition represents a significant wager by the miner on EV growth in the future—but it comes as EV demand has slackened off and lithium demand has followed. It could be a $6.7-billion mistake.

Then again, it could be a long-term play for dominance in a key sector of the energy system of the future.

Rio Tinto first announced the acquisition in October, offering a 90% premium to the UK-based lithium producer’s share price at the time of the offer. The deal was part of a plan to “establish a global leader in energy transition commodities”, from aluminum and copper to high-grade iron ore and lithium, Rio Tinto said at the time.

The company also noted that “With spot lithium prices down more than 80% versus peak prices, this counter-cyclical acquisition comes at a time with substantial long-term market and portfolio upside, underpinned by an appealing market structure and established jurisdictions.”

All that is well and good, and, after all, even Big Oil majors are building a presence in lithium as part of their transition diversification drive, fueled by activist investors, non-investing activists, and transition-dedicated governments. Exxon, notably, plans to spend a big chunk of some $20 billion earmarked for transition investments between 2022 and 2027 on lithium expansion, eyeing enough output to supply batteries for 1 million EVs by 2030.

Yet there is a problem with all that expansion. The problem is that demand for electric vehicles—the biggest driver of lithium demand—is not growing in accordance with assumptions and forecasts. Forecasters saw EV adoption boom on a straight upward curve the moment carmakers had more than a couple of models to offer.

Carmakers have done their part of the deal, designing and manufacturing scores of EV models. But demand has slumped in two key markets—because subsidies are starting to run out. The markets are Europe and the United States, and basically, EV demand is being driven up globally by the one single market where they have turned into a big feature of the local fleet: China.

These developments have not stopped forecasters from continuing with their bullish forecasts. S&P Global has become the latest to sound a note of optimism against a reality background that is not really conducive to such a sentiment. In a recent study, the ratings agency’s mobility unit said it expected EV sales globally to rise by some 30% in 2025, hitting 15.1 million, The National reported. The study revealed China’s EV market would grow the most, at 29.7% of the total forecast sales growth, followed by Europe, where EV sales are seen accounting for over 20% of the total, and the United States, where EV sales would represent 11.2% of the global total.

It is quite possible that Rio Tinto has based its expansion plans on forecasts like the one above. There is virtually no pessimistic forecast for EV demand out there, and that is quite understandable. All of these forecasts are based on certain assumptions that are considered safe since they are assumptions derived from stated government policies. The trap lies in the fact that stated policies can and will be changed if they can no longer be pursued.

Earlier this month BloombergNEF reported that the price of lithium-ion battery packs had seen the sharpest price drop since 2017, hitting a record-low of $115 per kW. The decline, BloomnergNEF wrote, was driven by “cell manufacturing overcapacity, economies of scale, low metal and component prices, adoption of lower-cost lithium-iron-phosphate (LFP) batteries, and a slowdown in electric vehicle sales growth.”

All of this should be a red flag for Rio Tinto, especially the last factor. Yet it has not stopped the company from making its massive transition bet. Perhaps at some point, pro-transition governments will somehow find a new source of subsidies to give to carmakers and EV buyers to stimulate demand, like China has been doing for years. Perhaps they would make the step from subsidies to mandates to guarantee that demand, although that would be risky. For now, however, Rio Tinto’s deal looks like a risky bet than a certain win.