The demand for lithium raw materials increases sharply, the cost of batteries goes up, and the ship goes up.

According to foreign media reports, the price of electric vehicle batteries will rise again in 2022 after a decade of sharp decline as the supply of lithium and other raw materials cannot meet the expanding demand.

As mining companies scramble to increase production at existing facilities and look for new sources of supply, the benchmark price of lithium carbonate set a new record at the end of 2021. China is the world's largest battery producer, and the domestic price of lithium raw materials has reached 261500 yuan ($41060 per ton), more than five times higher than in January last year.

The cathode is the most expensive component of the battery, and the prices of other raw materials used for the cathode are also rising along the way. Since January last year, the price of cobalt has doubled to $70208 a tonne, while the price of nickel has risen 15 per cent to $20045 a tonne.

The price of lithium battery packs plummeted from more than $1200 per kilowatt-hour in 2010 to $132in 2021, according to the data. But foreign media predict that the average price of battery packs could rise to $135 per kilowatt-hour in 2022. In general, cathode materials account for about 30% of the total cost of the battery pack.

Over the past decade, automakers and battery makers have been working hard to develop long-life, high-performance batteries and are seeking to continuously reduce the cost of battery production. However, the rise in raw material prices is undermining the technical and efficiency achievements achieved by enterprises in recent years.

And rising raw material prices pose a threat to the electrification that the auto industry is trying to achieve. You know, electrification has become a new industry, and even companies like Toyota, which have always been not optimistic about pure electric vehicles, have set their own production targets for electric vehicles.

Global electric vehicle sales are expected to reach 5.6 million in 2021, compared with 3.1 million in 2020, due to booming sales in China, according to the data. Demand for electric vehicles will grow further in 2022, so lithium will exceed production this year and deplete previous stocks, meaning lithium will be severely in short supply, according to a report released by S & P in December. The supply of lithium carbonate will jump from an estimated 497000 tons in 2021 to 636000 tons in 2022, but demand will jump from an estimated 504000 tons to 641000 tons or more in 2022, the report said.

In the short term, the supply of lithium will be very limited. Australian producers closed their mines after the low-price period in 2020, and as the epidemic continues, it has proved difficult for them to rehire staff and restore production to pre-pandemic levels.

As the global auto industry shifts from internal combustion engines to electric vehicles, there is pressure to ensure the supply of new raw materials. Battery makers are trying to enrich their sources of supply, including Ningde Times, a Chinese company that is the world's largest battery maker. "No country can compete with China in terms of cost competitiveness," said the Japanese lithium trader. "

In 2020, Tesla won the right to extract lithium from deposits in Nevada, a sign that carmakers are starting to wean themselves off middlemen. In the same year, BMW also signed a five-year cobalt supply agreement with Moroccan manufacturer Managem, worth $113 million.

Last month, Volkswagen also signed an agreement with Vulcan Group to purchase "zero-carbon" lithium from the latter to supply the needs of its battery factories. In addition, Volkswagen announced that it would set up a joint venture with Belgian materials company Umicore to produce precursors and anode materials in Europe.

Toyota says it has secured sufficient supply of battery raw materials to meet its needs by 2030, including lithium, through a partnership with Toyota to trade in (Toyota Tsusho).

Sanshiro Fukao, a senior researcher at Itochu Research Institute, said that in the car companies' view, these raw materials are their bargaining chips with battery manufacturers, and if they cannot ensure the supply of raw materials, they have no choice but to buy batteries from battery manufacturers at high prices. At a time when car companies around the world are trying to lower the price of electric vehicles, buying batteries at a high price can have fatal consequences.

Fukao says that for many car companies, the supply of raw materials for batteries will soon be as problematic as the supply of semiconductors. Moreover, due to a shortage of raw materials, car companies may not be able to produce electric cars as planned. "whether car companies can ensure the supply of raw materials at this stage will determine whether they can win in 10 years' time," he said. "