(Bloomberg) -- BASF SE and Eramet SA abandoned plans to spend up to $2.6 billion building a nickel-cobalt refinery in Indonesia, reversing course after slowing sales growth for electric vehicles crimped demand.

Global availability of battery-quality nickel has improved since the project was conceived, BASF said Monday in a statement. A surge in EV sales has also dimmed in the past year, leading to declines in nickel and cobalt prices. 

BloombergNEF this month slashed its battery-electric sales estimates by 6.7 million vehicles through 2026. The slowdown is particularly marked in Europe, BASF’s home market, and the US. Companies including Volkswagen, Stellantis and Mercedes-Benz have already pared back or shifted battery projects. 

Shares of BASF were little changed on Tuesday in Frankfurt. The stock is down 5.3% this year. France’s Eramet slipped as much as 1.4%. It has gained 38% in 2024.

BASF and Eramet in 2020 announced plans to invest as much as $2.6 billion in the Indonesian plant alongside nickel producer Eramet. Around that time, surging sales of electric vehicles sent prices for battery metals soaring, sparking widespread fears of shortages.

Prices have since slumped on the back of rising production of nickel and cobalt from other Indonesian operations, while carmakers and raw-material suppliers are increasingly rowing back on their ambitious expansion plans.

The scuttled BASF-Eramet project, known as Sonic Bay, was going to produce about 67,000 tons of nickel and 7,500 tons of cobalt a year, Indonesia’s Investment Ministry said in a statement in January last year. 

Eramet said it will focus on optimizing its Indonesian operations to supply nickel ore to local producers.

Indonesia aims to be a global hub for the EV supply chain and is already home to a number of projects — many of them Chinese-backed — to make battery-grade nickel. China has provided incentives likely totaling in the tens of billions of dollars and can now make far more batteries than it needs, which is driving down prices, according to BNEF. 

BASF is planning to bolster raw-materials supply for its European operations via a new battery recycling plant in Germany, which is due to start operations later this year.

In 2018, the company also signed a long-term nickel supply deal with Russia’s Nornickel to feed a new battery materials facility in Finland. The company said in April that the plant is inoperative due to ongoing permitting processes, and it hasn’t yet received any deliveries from Nornickel.

--With assistance from Christoph Rauwald and Craig Trudell.

(Updates with Tuesday’s trading in fourth paragraph)

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