Company halts construction of $2.7B battery project in eastern Ontario

After breaking ground in 2023, the company building a plant to producebattery components for electric vehicles in a municipality near Kingston, Ont., says it's delaying construction of the plant citing a slowdown in EV sales.

In a statement to CBC News,Umicore Rechargeable Battery Materials Inc. said Friday that its project in Loyalist Township is impacted by the "significant worsening of the EV market context and the impacts this has on the entire supply chain."

The project carried a total price tag of up to $2.76 billion and was projected to create 600 jobs in the regionback in 2023. According to a news release at the time from Innovation, Science and Economic Development Canada, the federal government was slated to investup to $551.3 million.

• New eastern Ontario plant to add hundreds of jobs, create battery components

Theprovince was to pay up to $424.6 million, but a source familiar with the project saidthat as of Friday, no provincial money has flowed to Umicore.

Umicorecited a situation onJune 12 when it announced that a contract with a Chinese manufacturerwould not materialize. The company said itslegacy contracts were tailing off faster than anticipated and there's a delay in the "ramp-up of contracts" in Europe.

"For Umicore, customers' demand projections for our battery materials have steeply declined recently," the statement reads.

The company said it's realigningits operations "to the new market reality," adding thata part of accomplishing this involves a "thorough review" of its battery materials business.

It's planning to present the conclusion of that review on its capital markets day during the first quarter of 2025.

• Canada is pouring billions of dollars into the electric vehicle industry. Will it pay off?

Canada responds to market, not vice versa: prof

Greig Mordue,an associate engineering professor at McMasterUniversity, says both federal and provincial governmentswanted to be early in the market.

"They wanted to be first, and that's fine if you're making a market but the reality of it is Canada's auto industry is made up of suppliers or affiliates of globally owned companies," Mordue said.

Mordue stated that the government has spent or committed tens of billions of dollarsbut the industry is simply not there yet.

He said Umicore is not the only company taking a pause to evaluate its standing and wait for the market to catch up, referencing Ford which also recently scaled back its EV production.

Locals and mayor weigh in

Kathleen Palmer, a resident of Bath, Ont., told CBC News that she's unsurprised by the news but is disappointed.

"It would have provided more employment in the area and it would have helped provide some additional services to our community because right now we have to go Kingston or Napanee for any kind of shopping," said Palmer.

She does believe that in the long-term, development will happen in the area with or without the plant.

"The plant it might've pushed it along a little faster," she said.

Loyalist Township MayorJim Hegadorn saidhe understands there will be a delay with constructionwhile the review is completed but insisted "the project is not shut down."

Hegadornsaid the township expects to receive more insight in the fall and is confident the project will proceed.

He added that Loyalist is in a good place economically and has seen steady growth over the years.