Prices for electric vehicle batteries are reportedly set to rise again in 2022 after a decade of sharp declines as supplies of lithium and other raw materials struggle to keep up with ballooning demand.
The benchmark price for lithium carbonate ended 2021 at a new record as miners scrambled to increase output from existing facilities and find new sources of supply. In China, the world's largest battery producer, the domestic price of lithium raw material reached 261,500 yuan ($41,060) a 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 in the cathode are also rising. The price of cobalt has doubled to $70,208 a tonne since January last year; nickel has risen 15 percent to $20,045 a tonne.
In 2010, the price of a lithium battery pack was above $1,200 per kilowatt-hour, but by 2021 the price has plummeted to $132, the data shows. But foreign media predicts that the average price of battery packs may rise to $135 per kilowatt-hour in 2022. Typically, cathode materials account for around 30% of the total cost of a battery pack.
Over the past 10 years, both automakers and battery manufacturers have worked hard to develop long-life, high-performance batteries, and are also looking to continuously reduce the cost of battery production. However, rising raw material prices are undermining the technological and efficiency gains that companies have achieved in recent years.
And rising raw material prices also threaten the electrification that the auto industry is trying to achieve. You must know that electrification has become a new industry torrent, and even companies like Toyota, which have always been not optimistic about pure electric vehicles, have also formulated their own electric vehicle production goals.
According to the data, due to the hot sales in the Chinese market, the total global electric vehicle sales are expected to reach 5.6 million in 2021, compared with 3.1 million in 2020. A report released by S&P Global in December said that demand for electric vehicles will grow further in 2022, so lithium use will exceed production this year, and previous stocks will be depleted, which means there will be a serious shortage of lithium. . Supply of lithium carbonate will jump from an estimated 497,000 tonnes in 2021 to 636,000 tonnes in 2022, but demand will jump from an estimated 504,000 tonnes to 641,000 tonnes or even higher, the report said.
In the short term, the supply of lithium will be very limited. Producers in Australia have closed their mines after a low-price period in 2020, and as the pandemic drags on, it is proving difficult for them to rehire staff and bring production back to pre-pandemic levels.
As the global auto industry shifts from internal combustion engines to electric vehicles, pressure to secure new raw material supplies comes with it. Battery makers are working to diversify their sources of supply, including Chinese company CATL, the world's largest battery maker. "No country can compete with China in terms of cost competitiveness," a Japanese lithium trader said.
In 2020, Tesla won the rights to extract lithium from deposits in Nevada, which means that automakers are already starting to wean themselves off middlemen. In the same year, BMW also signed a five-year cobalt supply agreement with Moroccan producer Managem in a deal valued at $113 million.
Last month, Volkswagen also signed an agreement with Vulcan Group to purchase "zero-carbon" lithium from the latter to supply its battery cell factories. In addition, Volkswagen announced that it will establish a joint venture with Belgian materials company Umicore to produce precursor and anode materials in Europe.
Toyota said that through its partnership with Toyota Tsusho, it has secured enough supply of battery raw materials, including lithium, to meet its needs through 2030.
Sanshiro Fukao, a senior researcher at the Itochu Research Institute, said that from the perspective of car companies, these raw materials are their bargaining chips with battery manufacturers. If the supply of raw materials cannot be ensured, they have no choice but to buy batteries from battery manufacturers at high prices. Buying batteries at a high price could have deadly consequences as automakers around the world struggle to lower the price of electric vehicles.
For many automakers, it won't be long before the supply of battery raw materials will be as problematic as the supply of semiconductors, Fukao said. Moreover, automakers may not be able to produce electric vehicles as originally planned due to shortages of raw materials. "Whether the car companies can secure the supply of raw materials at this stage will determine whether they can win in 10 years," he said.
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