Lithium prices are expected to continue to rise next year? Industry executive: the lithium market is like a hot property market right now.

Lithium prices have risen sharply this year at a pace not seen in years and have triggered a fierce global competition for supplies and growing anxiety about the possibility of a long-term shortage of batteries.

The lithium price index released by research firm and price supplier Benchmark Mineral Intelligence doubled between May and November and has risen by about 240% so far this year, which is at its highest level in five years.

The main reason for the rise in lithium prices is a bet on a continuing shortage of the metal. Demand for lithium is growing exponentially as Tesla and other automakers increase sales of electric vehicles. At the same time, after the recent bear market and supply chain bottlenecks, the supply of lithium has been limited by limited investment in new projects. Manufacturers also often face environmental objections and cumbersome licensing procedures when trying to extract lithium.

Although there are large reserves of lithium in the world, it is a long and costly process to convert it into battery-grade chemicals. When traders and corporate buyers take advantage of the situation, lithium prices are prone to large fluctuations in both directions.

(Lithium Americas Corp.) of American Lithium Industry "it's like being in a hot real estate market," said CEO Evans (Jon Evans). The current situation is a mess. "

The startup makes lithium in Nevada and co-owns a project in Argentina with its Chinese partner, Ganfeng Lithium. After the recent surge in share prices, the market capitalization of the American lithium industry has reached about $4 billion.

The share prices of lithium producers are rising.

The recent surge in lithium prices has raised concerns about whether battery makers and carmakers will have access to enough raw materials to meet demand for electric vehicles. Many companies are also grappling with the challenge of rising prices for other raw materials and key components such as computer chips.

Although commodities account for only a small portion of the total cost of cars, the surge in lithium prices could lead to a rise in the average price of lithium-ion battery packs for the first time in at least a decade, according to research firm BloombergNEF. It is thanks to the sharp drop in battery costs over the years that electric vehicles are more competitive than traditional fuel-fueled vehicles.

And the high lithium price, including Yabao's (Albemarle Corp.), For a few global lithium giants, it is undoubtedly a boon. These companies dominate the vast majority of the world's lithium supply.

Many in the industry are also scrambling to take advantage of this market excitement to buy up the shares of lithium producers, which have performed almost on a par with the surge in electric vehicles during the year. Global X lithium battery technology ETF (Global X Lithium & Battery Tech ETF) has risen more than 40% so far this year, and the shares of some lithium producers are up 70% or more.

Shares of lithium companies are the main channel for investors to bet on lithium prices because there is no lithium futures market as actively traded as the oil market.

The situation that supply exceeds demand is expected to be difficult to solve in the short term.

Most lithium comes from large mineral countries such as Australia and Chile. There are two ways to produce lithium carbonate: lithium from ores and from salt lakes. After extraction, it can be used to make battery-grade lithium compounds. At present, environmental opposition and delays in licensing are becoming key obstacles for lithium producers.

Mining giant (Rio Tinto PLC) promised to develop a lithium project in Serbia for more than $2 billion this summer, but thousands of protesters in the European country recently took to the streets against the government's permission for the company to carry out mining activities that could damage the environment.

"We must strike a balance between overall global environmental benefits and local impact," a Rio Tinto spokesman said in a statement. "We will not favor one over the other."

At the same time, the challenge for lithium producers now is that it will take years and a lot of investment to start the project, making it difficult for the supply side to keep up with the fast-growing demand. "there is enough lithium in the world. The problem is the investment needed to meet the demand target, "Eric Norris, president of Abel's lithium division, said on an earnings call last month.

Although some analysts believe that the influx of money into the industry will eventually push up supply and cool the rise in lithium prices.

Some analysts say hot sentiment in the lithium market could still propel the price rally into next year. "what may be more important is what market participants think, rather than how scarce the raw material really is," said Lukasz Bednarski, chief research analyst for lithium at IHS Markit. But he expects prices to fall sometime next year.