The prices of lithium and nickel, once the darlings of the green energy transition, have plummeted.

Lithium, known as “white gold” due to its critical role in electric vehicle (EV) batteries, has seen an 80 per cent drop in value over the past year. Nickel, another vital battery component, has not been spared, witnessing a 40 per cent decline.

This sharp downturn has had profound impacts, particularly in Western Australia, where major industry players have been forced to mothball mines, resulting in significant job losses and causing a near-panic in government circles. 

The decline in demand for EVs, slower than anticipated, coupled with a surge in supply, particularly from Indonesia with its lower operational costs, has been pinpointed as a primary cause of this market shift.

The ramifications of these falling prices are far-reaching. 

The world's largest lithium producer, Albemarle, has announced job cuts and a pause in expansion at its Bunbury refinery in WA's south. 

Similarly, WA billionaire Andrew Forrest's Wyloo Metals has ceased nickel mining in Kambalda, leading BHP Nickel West to shut down part of its processing operations nearby.

In response to these challenges, WA Premier Roger Cook has called for calm and collaboration, while Federal Resources Minister Madeleine King and her WA counterpart David Michael have held crisis talks with industry stakeholders. 

They are considering various measures, including royalty relief and a proposed production tax credit, to support the beleaguered industries.

This market shift has caught the attention of investors, with short sellers capitalising on the falling prices. 

According to ASIC, half of the 10 most shorted stocks in the Australian market are linked to battery minerals or electrification, with Pilbara Minerals leading the pack.

Meanwhile, the market's volatility has sparked debate over the future of the clean energy transition. 

Just a few years ago, a global race for critical minerals was underway, spurred by emissions reduction targets and a shift towards electrification. However, the recent downturn suggests that initial enthusiasm may have outpaced reality, leading to an oversupply and subsequent price collapse.

Despite the current market challenges, electric vehicle sales continue to rise, suggesting a sustained demand for critical minerals. 

However, the industry's future may see a consolidation, favouring more stable investors and potentially leading to a more rational market in the long term.