Record lithium prices threaten electric vehicle boom

Growing demand for key energy transition minerals and supply chain issues have propelled lithium prices to record highs, threatening to unravel a decade of steadily falling battery costs. Lithium prices hit an all-time high in early 2022, and analysts say the rally still has legs to continue higher. Soaring prices for one of the battery’s key metals are already putting enormous pressure on battery production costs, while demand continues to soar as nearly all major automakers develop electric vehicles (EVs). ) and aim to dramatically increase sales of zero-emission cars this decade. .

Yet the highest lithium price on record, with no signs of a near-term slowdown, is driving up the cost of batteries after a decade of continuous cost declines. This year could see the first battery price hike since 2010, potentially undermining global efforts to accelerate adoption of EVs and clean energy technologies, analysts say. Automakers could pass on higher battery prices to consumers, pushing back the expected date of price parity between electric and conventional vehicles by two years.

Lithium prices soar to record

On Dec. 31, the price of battery-grade lithium carbonate EXW China broke through the $40 per kilogram threshold for the first time, or $40,000 per ton, according to data from Benchmark Mineral Intelligence. Lithium carbonate prices in China peaked at $41,925/ton at the end of 2021.

Benchmark lithium carbonate prices in China have jumped nearly 500% throughout 2021, Benchmark Mineral Intelligence managing director Simon Moores said.

Early trading in 2022 suggests there’s “a lot of leg” left in this rally, noted Caspar Rawles, chief data officer at Benchmark Mineral Intelligence.

Related: Study: Electric vehicle adoption in Europe is about to explode In the week to January 6, lithium carbonate prices in China continued to rise as consumers restock ahead of the Chinese New Year festivities in late January and early February amid continued tight supply. It has also pushed prices higher in other regions, such as Europe and the United States, Fastmarkets said last week.

The outlook for the coming months and years is also very optimistic as new supply projects have faced some challenges.

“Customers are realizing that new supplies are very hard to come by,” Tony Ottaviano, chief executive of Australian lithium miner Liontown Resources, told Bloomberg.

Lithium prices are unlikely to crash soon, unlike in previous commodity cycles, Gavin Montgomery, research director, Battery Raw Materials at Wood Mackenzie, told Nikkei Asia.

“We’re entering a kind of new era in terms of lithium prices over the next few years because the growth will be so strong,” Montgomery said.

In other words, industry executives and analysts believe lithium prices will stay high for years.

Soaring lithium prices drive up battery costs

This is a boon for lithium producers, but a bane for battery prices, which have fallen by 89% between 2010 and 2021.

Lithium-ion battery prices were above $1,200 per kilowatt-hour in 2010, but had fallen in real terms to $132 per kWh by 2021, BloombergNEF’s annual battery price survey showed in November.

Li-ion battery prices fell 6% from $140/kWh in 2020 to $132/kWh in 2021, but could reach $135/kWh in 2022 in nominal terms due to higher battery prices. commodities, BloombergNEF said.

According to the research vendor, even low-cost chemicals like lithium iron phosphate (LFP), which is particularly exposed to lithium carbonate prices, have felt rising costs throughout the supply chain in recent years. month. Since September, Chinese producers have raised LFP prices by 10-20%, BloombergNEF estimated.

If further technology improvements cannot mitigate the higher cost of raw materials, the critical $100/kWh battery price threshold could be pushed back two years from BloombergNEF’s current expectations for 2024.

High battery prices could slow the deployment of electric vehicles

“It would impact EV affordability or manufacturer margins and could hurt the economics of energy storage projects,” the research provider said.

The higher price of batteries “creates a difficult environment for automakers, particularly those in Europe, who need to increase sales of electric vehicles in order to meet fleet average emissions standards,” said James Frith, chief executive. of energy storage research at BNEF and lead author of the report.

“These automakers may now have to make a choice between cutting margins or passing on costs, at the risk of dissuading consumers from buying an electric vehicle,” Frith added.

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If traditional automakers can’t secure batteries at relatively affordable prices, they would lose out in the global race to produce electric vehicles that are as affordable to consumers as similar conventional models, said Sanshiro Fukao, senior researcher at Itochu. Research Institute at Nikkei Asia.

High commodity prices and tight markets for metals critical to the energy transition could mean more expensive electric vehicles than initially expected and some automakers failing to meet their ambitious electric vehicle targets, Fukao added.

“Today’s data shows a looming mismatch between the world’s heightened climate ambitions and the availability of critical minerals that are critical to achieving those ambitions,” the agency’s executive director Fatih Birol said last year. International Energy Agency (IEA).

“If left unaddressed, these potential vulnerabilities could slow and cost more global progress towards a clean energy future – and therefore hamper international efforts to address climate change,” Birol noted.

By Tsvetana Paraskova for Oil Octobers

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