The chemical industry’s transition to sustainability was never going to be linear.
When you see the industrial-gas players — envied for their stability and long-term contracts — throwing caution to the wind by forecasting huge numbers for hydrogen investment, you could be forgiven for thinking something could go wrong.
Today, it’s the turn of cathode maker Umicore to disappoint.
In a stark warning, the Belgian maker of EV battery cathodes said it has seen a steep decline in potential orders due to a sharp slowdown in auto electrification. Stockpiles are mounting up. At best, Umicore’s sales volumes in 2024 will be on par with last year. It’s now predicting its Battery Materials Business Group will only break even this year (that includes a bonus from dropping a EU50 million provision).
That’s not a great look for a venture that’s absorbing huge amounts of capital investment: EU650 million in this year alone.
What happened? Just months ago, the take-and-pay contract pipeline looked assured, the EV opportunity set in stone.
The hit comes from automakers scaling back plans for electrification as the adoption rate slows and hybrids gain ground. Then China’s embrace of cheaper and rapidly-developing LFP cathodes has impacted demand for the more premium NMC cocktail that Umicore specialises in. Worse still, the LFP trend is starting to spread in European. There’s speculation that Stellantis is looking at this cocktail.
Umicore is also reassessing growth projections post 2024 to throttle investment in tune with EV production rates at customers like BMW and Stellantis.
“This is clearly disappointing,” Umicore CEO Bart Sap said. “We are falling between two chairs right now.”
The warning led analysts to question whether Umicore “has the right to win” in this battery-materials field, after all Johnson Matthey of the UK pulled out after years of investment. At one point on Wednesday, Umicore shares were down about 5.6%.
“I firmly believe NMC has its right to play, and will play, a major role in European and North American markets, more so than in China where LFP seems to be really engrained,” Sap said on a call. “LFP is there, I won’t deny it.”
It’s a tough break for Sap, who only took over as CEO on May 16. But he’s been with the company 20 years so is used to the ups and downs.
The irony is Umicore can lean on its petrochemical and autocatalysts business serving the combustion engine for earnings and cash flow as it rides out this bump in the road.