Construction Halt Sends Li-Cycle’s Stock Plummeting
Li-Cycle Holdings Corp., poised to receive substantial backing from the Biden administration, experienced a drastic decline in its share price after announcing a temporary suspension of construction on a groundbreaking lithium-ion battery recycling facility.
Construction Pause and Strategic Review
The Toronto-based company revealed its decision to halt construction at its Rochester Hub, pending a strategic review encompassing scope and budget considerations. Li-Cycle cited escalating construction costs, surpassing prior estimates, and is actively collaborating with the US Energy Department regarding a $375 million loan commitment.
Competition in the Battery Materials Sector
Li-Cycle is among numerous companies striving to assist the US in meeting the growing demand for battery materials required for the transition from gasoline-powered vehicles. The government has allocated substantial funding through subsidies and tax incentives to establish a domestic supply chain, aiming to compete with China’s dominant industry position. The setback underscores the challenges the US and the Western world encounter when endeavoring to essentially launch an industry from the ground up.
Share Price Plunge
Li-Cycle’s shares tumbled by as much as 49% in New York, ultimately closing at $1.23, marking a 46% drop for the day, the most significant decline in the company’s history.
Statement from the Company
According to a statement from the company, “The board of directors has decided to pause construction work on the Rochester Hub, pending a review of the project, including an evaluation of the go-forward phasing of its scope and budget, including construction strategy. As previously disclosed, engineering and procurement for the project are largely complete, with the current focus being on construction activities on site.”
Biden Administration’s Support
Li-Cycle’s shares had surged by 6% in February when the Biden administration announced that the company’s US subsidiary would receive the loan to support the expansion of a facility aimed at recycling lithium-ion batteries into chemicals suitable for over 200,000 electric vehicle batteries annually. This funding is part of the department’s Advanced Technology Vehicles Manufacturing Loan Program, aligning with the White House’s broader goal of achieving a 50% share of zero-emissions vehicle sales by 2030.
This surprising development coincides with congressional Republicans’ pledge to identify the next Solyndra LLC, referencing the California solar manufacturer that faltered shortly after receiving a $535 million loan guarantee during the Obama administration. This event led to a prolonged pause in loan activities due to intensive congressional scrutiny.
Loan Still in Conditional Phase
The US Energy Department clarified that the Li-Cycle loan remains in the conditional phase, with no disbursement of funds to date.