Rising Lithium Prices Risk Pushing EV Dreams Off The Road
As demand for electric vehicles grows amid a push for a ‘greener’ economy, carmakers globally are grappling with rising prices of everything from semiconductor chips to copper and aluminum. Now the expense of lithium, a metal found in every commercial electric battery, is starting to bite as a lack of mining capacity strains supplies.
Experts say it is likely to get worse and more investment in production is needed to meet electric vehicle supply chain needs.
While alternatives such as sodium exist, they are some years away from mass manufacture and demand will only grow. New mines take years to develop, while countries are promising to stop the sale of petrol and diesel engines – in Britain’s case by 2030.
Pricing and analysis firm Benchmark Mineral Intelligence estimates lithium carbonate prices could push up the production costs of electric batteries, especially mass-market models, by 16pc or more.
Lithium carbonate, which is often used to make cheaper electric cars, is up 289pc so far this year to about $24,000 per tonne, while lithium hydroxide, used in longer-range motors, is up 192pc to about $26,000 per tonne, according to figures from Benchmark.
“I think it’ll go higher,” says chief executive Simon Moores. “Long-term lithium demand is locked in; the question is how much you get out of the ground and into EVs as quickly as possible.”
Among the two, lithium carbonate is starting to be more widely used by electric vehicle makers, making its rising costs a headache.
It is used to make lithium-iron-phosphate (LFP) batteries that do not need cobalt, an element found largely in The Democratic Republic of Congo where mining is tainted by accusations of human rights abuse. The batteries are also considered to be safer, albeit with a shorter range.
Tesla told customers in October to expect more LFP batteries in its standard-range models.
Demand is being driven in China, Tesla’s fastest-growing market and home to one of its Gigafactories in Shanghai. It comes as the Asian nation tries to clean up its carbon act and push ahead with homegrown electric cars from the likes of Nio and Xpeng.
Carmakers worldwide are lining up to commit billions of pounds to electrify their fleets, and all will need thousands of tons of lithium.
In July Fiat and Vauxhall owner Stellantis committed £26bn to electric vehicles and software developments in the next four years, while Nissan pledged £13bn last week to a program that will see it decarbonize by 2050.
A limiting factor for battery makers is that while a Gigafactory can be built in a couple of years, it will immediately need a source of the metal. A new mine, however, requires five to seven years before production can begin.
The mine must also produce a certain quality of the commodity, which can slow things down further, according to Benchmark’s Moores.
Australia is currently the biggest producer, having mined almost half the world’s lithium in 2020, according to the US Geological Survey (USGS), while second-in-line Chile holds the largest reserves.
China, a top 10 producer and with the fifth most reserves, owns many of the processors that turn the metal into batteries.
While lithium is not scarce – more reserves are being found as exploration grows – the capacity to pull it out of the ground is limited.
China, a top 10 producer and with the fifth most reserves, owns many of the processors that turn the metal into batteries. More than 70pc of the mined metal goes towards being used in batteries, the USGS noted.
And as its price rises, the portion of a car’s cost from lithium has gone from 1.5pc to 4pc since the start of the year, according to Moores.
So far, consumers are being cushioned from the metal’s price rises. As carmakers’ margins become more squeezed, however, buyers may end up absorbing the extra expense in the coming months.
This is because many carmakers have signed long-term deals with battery makers and lithium processing companies but not at a fixed price, says Scott Yarham, head of battery metals pricing at S&P Global Platts.
“Their involvement with lithium hedging is still in its infancy—and the same applies to all other stages of the supply chain, which still didn’t embrace hedging for the most part,” he said.
Rising lithium, however, isn’t the only worry. Andrew Bergbaum, a partner and car expert at consulting firm AlixPartners, says its swing in price is symptomatic of a broader problem carmakers face as other components suffer price jumps and supply droughts. Copper and aluminum, for instance, reached 10-year highs in the spring.
“While lithium price hikes are likely to impact car prices to some degree, there is a much bigger concern at play here,” he says.
“The battery of an electric vehicle only contains around 40-60kg of lithium, but the price hikes that we’re seeing across a broader range of materials could send the cost of a car soaring by thousands.
“It has never been more important for manufacturers to be able to pivot rapidly in the face of disruption and for the industry as a whole to find new ways to innovate.”
While lithium dominates today’s car batteries, it is far from the only solution. Sodium, found in seawater, could eventually ease the car industry’s reliance on its fellow metal.
Sodium technology could be about up to seven years from mass production and could replace lithium-based batteries for cheaper cars, says Prof David Greenwood, a battery development expert at the University of Warwick, although this depends on how much is spent on its development.
“From our perspective, we think we see sodium ion as being a chemistry that the UK could do pretty well at, but which isn’t quite ready for mass production yet,” he says.
“Lithium mining is confined to certain geographies. Sodium isn’t, it’s way cheaper, is much more sustainable, and it doesn’t have the geopolitics around it” since anyone can obtain it.
Prof Greenwood adds, however, that lithium is likely to come up trumps in the making of premium long-range vehicles.
But until a viable alternative is produced to ease constraints or miners dig more out of the ground, the price of lithium looks set on rising.
With demand moving in the same direction, carmakers’ electric dreams risk veering off track.
See more here: climatechangedispatch.com
Header image: Calvin Global
Please Donate Below To Support Our Ongoing Work To Defend The Scientific Method
PRINCIPIA SCIENTIFIC INTERNATIONAL, legally registered in the UK as a company 
incorporated for charitable purposes. Head Office: 27 Old Gloucester Street, London WC1N 3AX.
Trackback from your site.
Carbon Bigfoot
| #
I predicted this supply chain gaffe several years ago, probably on these pages or on WUWT.
Interestingly Ford Motors USA has stopped taking orders for the new F-150 EV Truck they gave some cockamamie excuse on CNBC this AM. As someone has said before on this website the world is run by a clusterfuck of imbeciles.
Reply
Tom
| #
So true and has been for the last 10,000 years.
Reply
Richard Noakes
| #
There are two problems with electric cars and the first one is the most obvious – you own a car, You pay for a battery for the electric starter of your car engine and you know, with continual daily use, that the battery dies after 3 or 4 years and you have to replace itwith a new battery and the same thing with electric cars, except the batteries cost more than the original car did and then you are forced to upgrade, for a cheaper replacement new car and much of an electric car is not reuseable, so don’t expect anything much for the old battery dead one.
The second problem for electric cars is “Blue Fuel” which is another way of splitting water into Hydrogen and Oxygen (H2O) and using the Hydrogen part of the water molecules to power your petrol driven car.
Petrol driven cars can be converted to “Blue Fuel” without too much compromize and it is a lot cheaper to run your existing car on water Hydrogen fuel cells, than it is to buy an electric car, and a new one at that, for the same job.
Electric cars are OK around cities, but if you want to drive longer distances, then the journey becomes much longer, because you have to recharge your car at recharge points, for at least an hour each time, over multiple recharge points, to achieve a journey you could do in a petrol driven car, quickly and efficiently the first time around, so much so, that many people who buy electric cars, replace them with petrol driven cars, sooner or later, because of the inconveniences of electric cars.
Ask Steve Kirsch – he drives a Tesla.
Much of what you see is false advertising to get you to buy into electric cars, the technology is too new, to be safe with it.
You also should factor in these electric cars catch fire when there is an electricity short in the engine or battery bays and once a fire starts, you don’t have much time to get out of the car before it is engulfed in flames and there is simply no way to put an electric fire out – the emergency fire services don’t know how to and the car has to be left to burn itself out, which might be OK on the open road, but with timbers all around, it could be potentially a large fire, which consumes everything in its path and the focal point of the fire and the owner of that car, could easily be held financially responsible for the damage that car did, when it “went up”.
Just saying.
Richard
Reply
Tom
| #
That pretty much sums it up. EV’s are more faddish than anything close to long term practicality.
Reply
Tom
| #
Nein lithium? Wunderbar! The silliness of EV’s is that in 5-10-15 years when you need to replace that big old lithy battery, it will cost a fortune. You will need a loan.
Reply
Gary Ashe
| #
Whoever could have predicted that the ”rare” earths that electric cars rely on would be in short supply when a world wide roll out began to gather pace and demand for those ”rare” earths rises, and as such prices would go up and up,
Reply