Umicore continues pause of Loyalist battery plant construction

Key Takeaways:

• Umicore has decided to continue the pause on its new battery materials plant in Ontario, prioritizing the maximization of capacity at existing facilities before expanding further.
• Umicore has outlined significant cost-saving initiatives, including a potential impact on 260 positions across the company, workforce reductions in its China battery materials plant, and restructuring of R&D activities to enhance efficiency.
• These measures are projected to save approximately $60 million annually by 2025.

The Whole Story:

Belgian materials technology company Umicore has announced a continued pause on the construction of its new battery materials plant in Loyalist, Ont. as part of an ongoing strategic review of its battery materials business. The decision comes as the company aims to maximize capacity utilization of existing plants before pursuing further expansion.

Strategic Realignment

Officials say the pause in construction was made in close alignment with Umicore’s customers. The company’s long-term supply agreement with AESC for high-nickel cathode active materials for the North American market will now be fulfilled from Umicore’s plant in Cheonan, Korea.

Umicore has not drawn on the incentives offered by the Canadian and Ontario governments for the Loyalist plant. Should construction resume in the future, the company will retain access to these incentives under the same conditions, including employment commitments.

Cost-Saving Measures

In addition to the construction pause, Umicore has unveiled details of its cost-saving initiatives:

• Approximately 260 positions may be impacted across select parts of the organization
• Workforce resizing in the Battery Materials production plant in Jiangmen, China
• Downsizing of Group Corporate Functions
• Restructuring of R&D activities for improved efficiency and customer focus
• Transfer of Heavy-Duty Diesel R&D work to Hanau, Germany, and discontinuation of R&D activities in Hørsholm, Denmark.

These measures are expected to generate approximately $60 million in annualized savings by 2025.

Industry Challenges

Bart Sap, CEO of Umicore, acknowledged the challenging environment facing the company: “Umicore is navigating a complex transitioning of the automotive industry towards electric mobility. Serving our North American customers out of Korea is now clearly the most effective use of our assets.”

Umicore has begun consultations with trade unions and works councils representatives to ensure support for affected employees. In Belgium, where approximately 100 positions may be impacted, the company has initiated the information and consultation process in accordance with legal requirements.

The company’s decision to pause the Canadian plant construction and implement cost-saving measures reflects the broader challenges facing the electric vehicle (EV) industry. Earlier this year, Umicore had already lowered its 2024 outlook for the Battery Materials Business Group due to a sharp slowdown in EV demand growth.