Federal and provincial funds safe after Umicore suspends battery plant

The federal and provincial governments have confirmed that they did not disburse any funds to Umicore Rechargeable Battery Materials Canada Inc. before the company decided to suspend construction of its $2.7-billion battery components plant in Loyalist Township.

Umicore cited “the significant worsening of the EV market context and the impacts this has on the entire supply chain,” as its reason for halting the project.

The construction, which began in 2023, was expected to create 600 jobs and had received nearly $1 billion in promised funding: up to $551.3 million from the federal government and $424.6 million from the provincial government.

In the initial announcement last year, Umicore stated that the project had the potential to manufacture sufficient battery materials to support the production of over 800,000 EVs per year. Last week, it announced construction was on hold.

“We are delaying spending on the construction of our Loyalist plant until we've reached the conclusions of the review of our Battery Materials business, as the EV market has worsened," Umicore told Canada's National Observer in a written statement. "For Umicore, customers’ demand projections for our battery materials have steeply declined recently." The statement also noted that, on June 12, the company announced a contract with a Chinese manufacturer would not materialize, legacy contracts were tailing off faster than anticipated, and there was a delay in the ramp-up of contracts in Europe.

Ontario Premier Doug Ford, speaking to reporters at an unrelated event on Monday, confirmed the battery plant has yet to receive the promised provincial funding.

“We haven't given them a penny yet. Once they start investing, they'll receive funds,” Ford said.

Ford called Umicore a “great company” and emphasized that EVs are the way of the future. “As you see, literally, every single day, you're seeing plazas and gas stations and other areas, rest stops, are installing EV charging systems and building up the infrastructure. As that builds out, we're confident that more and more EV sales will happen,” Ford said. “But just think, 31 per cent, it's increased worldwide — that's going to continue to grow.”

The federal government also confirmed its promised funds have yet to be handed over to the company. Audrey Champoux, spokesperson for François-Philippe Champagne, minister of Innovation, Science and Industry Canada, said the ministry is in touch with Umicore to better determine next steps following the announcement.

“Canadian automotive and battery manufacturers are significantly investing in EV production, often needing to adjust their timelines and plans to ensure long-term success,” Champoux said. “We fully support this project, but to date, no federal government financing support has been disbursed to Umicore.”

A 2022 report from Clean Energy Canada estimated that Canada has the potential to build a domestic EV battery supply chain, which could support up to 250,000 direct and indirect jobs by 2030 and add $48 billion to the Canadian economy annually.

Canada’s automotive sector currently employs over 500,000 workers, including nearly 100,000 auto plant workers in Ontario. It contributes $16 billion annually to Canada’s gross domestic product, making it one of the country's largest export industries.

It’s also one of the most polluting. Canada’s transportation sector released nearly 180 million metric tons of carbon dioxide into the atmosphere in 2022, accounting for about a quarter of the country’s total. Experts say domestic battery production will help Canada achieve its ambitious target of 100 per cent zero-emission vehicle sales by 2035 and both the federal and provincial governments will play crucial roles in supporting this transition.

According to S&P Global Mobility, as of the second quarter of 2023, zero-emission vehicles (ZEVs) constitute one out of every 10 new vehicles registered in Canada. The ZEV market share reached a new high of 10.5 per cent for the second quarter of 2023, up from 9.2 per cent.

S&P Global Mobility reported on its website that battery electric vehicles (BEVs) achieved their highest quarterly registration volume on record in the second quarter of 2023, with nearly 35,000 units registered, representing 7.8 per cent of all new vehicle registrations.

Notably, one in every 10 new vehicles registered in Canada during the quarter was a ZEV, surpassing the previous market share record of 10.3 per cent set in the fourth quarter of 2022.
To achieve its goal of reaching net-zero emissions by 2050, the federal government has mandated that all newly sold light-duty vehicles must be zero-emission vehicles (ZEVs) by 2035.