The demand for lithium raw materials has soared, and the cost of batteries has risen
Supply & demand imbalance
As the supply of lithium and other raw materials is difficult to meet the expanding demand, the price of electric vehicle batteries will rise again in 2022 after a decade of sharp decline.
While mining companies are vying to increase the output of existing facilities and find new sources of supply, the benchmark price of lithium carbonate has set a new record at the end of 2021.
Price soared
China is the world’s largest battery producer. The domestic price of lithium raw materials has reached approximately US$41,060 per ton, which is more than five times higher than in January last year.
The anode electrode is the most expensive component of the battery, and the prices of other raw materials used in the anode electrode are also rising. Since January last year, the price of cobalt has doubled to US$70,208 per ton; the price of nickel has increased by 15% to US$20,045 per ton.
In 2010, the price of lithium battery packs was more than US$1,200 per kilowatt-hour, and by 2021, the price plummeted to US$132. However, foreign media predict that the average price of battery packs may rise to US$135 per kilowatt-hour in 2022. Under normal circumstances, in the total cost of the battery pack, the proportion of the positive electrode material is about 30%.
In the past 10 years, automakers and battery manufacturers have been striving to develop long-life, high-performance batteries, and are also seeking to continuously reduce battery production costs.
Market impact
However, the rise in raw material prices is destroying the technological and efficiency achievements that enterprises have achieved in recent years.
Moreover, rising raw material prices have also threatened the electrification that the auto industry is striving to achieve. You must know that electrification has become a new industry torrent, and even companies like Toyota that have always been not optimistic about pure electric vehicles have set their own electric vehicle production goals.
Due to the hot sales in the Chinese market, the total global sales of electric vehicles in 2021 are expected to reach 5.6 million, and this figure will be 3.1 million in 2020.
A report released by S&P Global in December stated that the market’s demand for electric vehicles will further increase in 2022, so the use of lithium this year will exceed production and the previous inventory will be exhausted, which means that there will be a serious shortage of lithium.
In 2022, the supply of lithium carbonate will jump from an estimated 497,000 tons in 2021 to 636,000 tons, but the demand will jump from an estimated 504,000 tons to 641,000 tons, or even higher.
In the short term, the supply of lithium will be very limited. Australian producers closed their mines after the low price period in 2020. As the epidemic continued, it proved difficult for them to re-employ employees and restore production to pre-pandemic levels.
As the global automotive industry shifts from internal combustion engines to electric vehicles, pressure to ensure the supply of new raw materials will follow.
Participants
Battery manufacturers are striving to enrich their supply sources, including CATL, the world’s largest battery manufacturer. A Japanese lithium trader said: “In terms of cost competitiveness, no country can compete with China.”
In 2020, Tesla obtained the right to extract lithium from mineral deposits in Nevada, which means that automakers have begun to get rid of their dependence on middlemen. In the same year, BMW also signed a five-year cobalt supply agreement with Moroccan manufacturer Managem, with a transaction value of US$113 million.
Last month, Volkswagen also signed an agreement with the Vulcan Group to purchase “zero-carbon” lithium from the latter to supply its battery cell factory. In addition, Volkswagen also announced that it will establish a joint venture with Belgian materials company Umicore to produce precursor and anode materials in Europe.
Toyota said that through cooperation with Toyota Tsusho (Toyota Tsusho), they have obtained enough battery raw materials to meet its demand before 2030, including lithium.
Sanshiro Fukao, a senior researcher at Itochu Research Institute, said that in the view of car companies, these raw materials are their bargaining chips with battery manufacturers. If the supply of raw materials cannot be ensured, they have no choice but to buy batteries from battery manufacturers at high prices.
Under the background that global car companies are working hard to reduce the price of electric vehicles, buying batteries at high prices may have fatal consequences.
Fukao said that for many car companies, the supply of battery raw materials will soon have the same problems as semiconductor supply.
Moreover, due to the shortage of raw materials, car companies may not be able to produce electric cars as originally planned. He said: “Whether car companies can ensure the supply of raw materials at this stage will determine whether they can win in 10 years.”
