Lithium price rises by 355 percent: Growth rate of electric vehicles may slow down
1Lithium price rises by 355 percent: Growth rate of electric vehicles may slow down
It is predicted that the price of lithium, which is critical for electric vehicle batteries, has increased by 355 percent in the last year and potential supply constraints may hinder the growth rate in electric vehicle sales.
With the clean energy transformation that has accelerated in the world in recent years, the importance of critical minerals is also increasing. Many critical minerals such as lithium, copper and nickel are used in many clean technology products, especially wind turbines, solar panels and batteries.
The proliferation of these technologies means that more and more critical minerals will be needed.
Clean energy technologies currently account for 30 percent of lithium demand, which is one of the most critical minerals in terms of battery performance, lifespan and energy density.
It is predicted that this rate will increase to 75 percent by 2040. Demand for lithium from clean energy technologies is expected to show the fastest growth among other critical minerals.
60 percent of LITHIUM PROCESSING CAPACITY IS IN CHINA
The fact that the production of lithium as a mineral occurs in geographically limited regions of the world, including Australia (52%), Chile (22%) and China (13%), brings along supply risks.
Lithium ore must be converted into lithium chemical and lithium hydroxide, which must be processed and refined in order to be used in batteries or similar products.
60 percent of global lithium processing capacity is located in China alone. Therefore, any disruption that may interrupt lithium supply in China is reflected in prices as an increase.
TONS OF LITHIUM PRICE DOUBLED IN ONE YEAR
According to the data shared by the International Energy Agency (IEA), the price of lithium per ton rose from $ 13 thousand 154 on August 31, 2021 to $ 59 thousand 928 per ton on August 31, 2022. Prices rose 355 percent in one year.
On the other hand, while the price of lithium per ton was $36,962 in January 2022, prices have increased by 62 percent since the beginning of this year.
ELECTRIC CAR SALES INCREASED 108 PERCENT
According to information compiled from the EV-volumes internet-based electric vehicle sales data provider, global electric vehicle sales reached 6.75 million units last year, an increase of 108 percent compared to the previous year. Despite the rise in sales, it is predicted that rising input costs may adversely affect overall growth.
IEA Energy Analyst Tae-Yoon Kim stated that the price of lithium was not affected by the Russia-Ukraine War as much as other minerals, and that Russia is not a major producer of lithium as it is in minerals such as aluminum, nickel and palladium.
INDUSTRY'S LITHIUM DEMAND DOUBLE IN ONE YEAR
Noting that the increase in lithium prices is due to the fast-growing demand from the electric vehicle sector, Kim said, "Price increases in some critical minerals have been more limited, but lithium prices have been quite high so far. This is due to the increasing demand in the electric vehicle sector, as well as the recent extreme weather in China. "The fact that 60 percent of the lithium processing capacity is in China directly affects the supply," he said.
Kim said the electric vehicle industry's lithium demand has nearly doubled from 140 kilotonnes in 2020 to 270 kilotonnes in 2021.
Expressing that they expect demand to exceed the level of 2021 this year, Kim said, "The lithium market is smaller than other minerals. Therefore, rapid increases in demand can have greater effects on prices." said.
DECREASING PRICES DEPENDS ON NEW SUPPLY CAPACITY
Kim explained that there are two types of prices, spot and contract prices, and that some automotive manufacturers make long-term contracts to ensure supply security and hedge prices.
Noting that spot prices are easier to follow than contract prices, Kim continued:
“Contract prices are generally based on spot prices, but spot price changes are reflected in the contracts a little later. We can expect spot prices, which are still quite high for lithium, to a more reasonable level by the end of this year or at the beginning of 2023. However, this decrease in prices is especially in Argentina, Australia, USA. Depending on the planned commissioning of some projects in Canada and New Zealand, prices will decrease slightly as new supply capacity is built.
Therefore, there is more pressure to supply on the processing and refinery side than on the mine side. We cannot say that the market has faced a major supply constraint yet, but a potential supply constraint may be experienced if the new projects in question are not put into use in accordance with the schedule. Electric vehicle sales are likely to be affected by the high prices. "Electric vehicle sales continue to rise, but higher prices could hamper the pace of sales growth."