Strong growth in electric vehicle sales over the past two years has led to a sharp rise in the price of lithium needed to make electric car batteries. This has raised concerns about a shortage of commodities that could last a decade or more.
Keith Phillips, chief executive of Piedmont Lithium, the Piedmont lithium company, said original equipment manufacturers (OEM), which make parts for end-users, were "fully committed to electric vehicles". He added that OEM and battery companies are investing tens of billions of dollars in battery factories, a big change from a few years ago.
"I am very optimistic about the future of lithium," Phillips said. We expect a big increase in demand [for electric cars]. Because electric cars are smoother, quieter and faster, and fuel and maintenance costs are much lower. As the demand for electric vehicles grows, so will the demand for lithium, and we expect a shortage of lithium for at least the next 10 to 15 years. "
AutoPacific, a market consultancy, predicted in a February report that US sales of all-electric light vehicles would reach 669200 by 2022, up 155 per cent from 262000 in 2020.
The electric vehicle market accounts for nearly 80 per cent of lithium-ion battery demand, according to a report by Jiayue Zheng, a Wood Mackenzie consultant owned by Verisk Analytics, a US multinational data analysis and risk assessment company. She said the lithium-ion battery market suffered a shortage last year because of "strong" demand for electric vehicles and rising prices of raw materials.
The development of lithium ore may not keep up with it.
Phillips expects a severe shortage of lithium for OEMs and battery companies to produce batteries in the future, as natural resource projects take more than a decade to "create". Most lithium project developers slowed during the 2018-2020 bear market.
President Joe Biden will sign an executive order authorizing the use of the Defense production Act to ensure the key materials needed to advance the transformation of clean energy, the White House said on Thursday. The White House specifically pointed out that the order will authorize the mining and processing of materials such as lithium, nickel, cobalt, graphite and manganese for the production of high-capacity batteries.
Australia, the world's largest lithium producer, predicts that the lithium supply and demand market will tighten by 2023. In a quarterly report released in December, the company said global demand for lithium carbonate equivalent was expected to rise from 486000 tonnes in 2021 to 724000 tonnes by 2023 as "global electric vehicle consumption will rise" driven by government measures, lower car prices and increased vehicle choice.
Cameron Perks, a senior analyst at Benchmark Mineral Intelligence, said: "there has been some big increase in lithium supply, but the growth in demand is much larger."
He also said that the recent rise in oil prices has accelerated the demand for electric vehicles. Us crude oil futures closed at their highest level since 2008 on March 8, pushing the average retail price of US gasoline to an all-time high of $4.331 a gallon on March 11.
The price of electric vehicles has also risen due to overall inflation, but this is also due to the rising cost of lithium and other raw materials, Perks said. For lithium contracts, there is a "cost transfer mechanism, which essentially means that higher lithium prices will be passed on to consumers."
