Lithium prices hit record high, threatening to further drive up high EV costs

The price of lithium carbonate, the key material used to make electric car batteries, continued to soar, tripling in the past year.

The precious ore is mainly processed in communist China, which has a monopoly on the battery market.

Lithium carbonate prices in China hit $71,315 a ton on Sept. 16, according to data from Asian Metal Inc.

This has led to an increase in the cost of lithium batteries, which has increased due to high demand and disruptions of the containment in major Chinese production centers.

However, current price increases for the strategic mineral are likely to raise inflation concerns and add more cost outlays to the supply chain.

A two-week power shortage in August in China’s Sichuan province, which is the source of a fifth of the country’s lithium output, hampered supplies in an already tight market.

Western governments have led an accelerated push for these so-called green electric vehicles, as these countries aim to transition away from traditional energy sources.

Around 4.2 million battery electric vehicles and plug-in hybrid electric vehicles were sold worldwide in the first half of 2022, up 63% from the same period last year, according to a Canalys report in early August. .

Dealing with traffic jams

The Communist Party of China (CCP), according to Bloomberg, held a policy review meeting on Sept. 15 to address blockages at lithium facilities.

Party officials from the Ministry of Industry and Information Technology have asked China’s major lithium producers to stabilize prices.

Producers have been ordered not to agree on prices and to avoid quote prices that deviate widely from cost, the ministry said.

The communist regime said it would take further steps to encourage exploration, stabilize imports and promote recycling to reduce costs.

A worker with car batteries at a factory of Xinwangda Electric Vehicle Battery Co. Ltd., which manufactures lithium batteries for electric cars and other uses, in Nanjing, east China’s Jiangsu province, on March 12, 2021. (STR/AFP via Getty Images)

Analysts say a cut in battery production from China could slow the growth of electric vehicle deployment around the world, as price increases would ripple through the costs of electric vehicles.

Soc. Quimica & Minera de Chile SA (SQM), the world’s second-largest lithium producer, said it expected a “very tight market” in the coming years.

SQM expects prices to be slightly in the third quarter compared to the previous quarter and expects them to be similar in the fourth quarter, according to an investor presentation on Sept. 15.

China’s top battery producer Ganfeng Lithium told customers last week that prices for new orders are likely to face a substantial hike due to lithium supply issues.

The company manufactures batteries for small portable items and batteries for Bluetooth headphones.

Find alternatives to China

Due to lithium shortages in China, battery and automakers have scrambled to secure reliable and stable alternative lithium supplies.

The largest suppliers of lithium carbonate are Australia with 323,000 tons, followed by Chile with 145,000 tons, Argentina with 30,000 tons and China with 8,000 tons.

There are several projects in North America, Australia and the European Union to produce more raw ore.

Australia opened production at a new processing site earlier this year, while Albemarle Corp., the world’s largest lithium producer, is building a new refinery in the southeastern United States.

One of the key provisions of US President Joe Biden’s Cut Inflation Act provides nearly $400 billion for spending on renewable energy, including lithium production.

The White House plans to install 2,300 grid-wide battery factories by 2030 and provide tax breaks to electric vehicle makers if they use certain components like US-made batteries.

The United States once supplied 27% of the world’s lithium in 1996, but that has fallen to 1% in 2020, according to BP’s Statistical Review.

Only one lithium mine in the United States remained open just two years ago.

Epoch Times Photo
Rod Colwell, CEO of Controlled Thermal Resources (R), and Tracy Sizemore, the company’s global director of battery materials, walk along geothermal mud pots near the shore of the Salton Sea, where the company extracts lithium, in Niland, California. , July 15, 2021. (Marcio Jose Sanchez/AP Photo)

Last week, electric vehicle manufacturing giant Tesla announced plans to build a lithium refinery in Texas using local tax breaks.

“Tesla is evaluating the possible development of a battery-grade lithium hydroxide refining facility, the first of its kind in North America, as well as facilities to support other types of processing, refining and manufacturing battery materials and ancillary manufacturing operations in support of Tesla’s sustainable product line,” Tesla said in its application to the Texas Comptroller’s Office.

The electric vehicle maker said the plant will transform raw lithium into a “usable state for battery production” and that its environmentally friendly lithium production process is designed to consume less hazardous reagents and create usable by-products.

In April, Tesla CEO Elon Musk said on an earnings call that lithium production is critical to the future of the industry and that entrepreneurs should get into mining.

“Right now, we think lithium mining and refining…seems to be a limiting factor, and is certainly responsible for a lot of the cost of sales growth,” Musk said, explaining . “I think that’s the biggest element of cost growth right now.”

Bryan Jung

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Bryan S. Jung is a New York native and resident with a background in politics and the legal industry. He graduated from Binghamton University.

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