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Lithium Prices Surge on EV Demand from China

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lithium prices

Lithium Prices Surge on EV Demand from China

Amid growing conviction on the bright future of electric vehicles (EVs), the scramble for battery metals like lithium is just beginning.

By the first week of 2022, prices for lithium carbonate, a key ingredient in lithium iron phosphate (LFP) batteries, reached a new high of 300,000 yuan or nearly $47,500 per ton in China.

The above graphic charts the exponential surge in both lithium prices and China’s EV sales between 2015 and 2021.

How Lithium Prices Changed in 2021

After brief spikes in 2016 and 2017, lithium prices were on a downtrend until 2021. With that context, it’s safe to say that the year’s 497% surge was nothing short of dramatic.

Here’s how lithium prices changed in 2021, on a quarterly basis:

DateLithium carbonate price per ton in China*% increase in 2021
January 01, 2021$7,328.900%
April 01, 2021$13,396.9082.70%
July 01, 2021$14,024.4091.40%
October 01, 2021$27,733.70278.50%
December 31, 2021$43,732.80496.70%

*Represents prices for battery-grade lithium carbonate. Converted from yuan to USD via xe.com as of Jan 19, 2022.
Source: TradingEconomics

As producers struggled to keep up with rising demand for battery-grade lithium carbonate, prices increased six-fold in 2021.

This rise was amplified in October when Tesla announced a switch to LFP batteries for all of its standard-range cars. Previously, Tesla only used LFP batteries for cars produced in China.

EV Batteries and the Resurgence of LFP Cathodes

Why did Tesla make the switch?

LFP was the initial cathode chemistry used in lithium-ion batteries for EVs in China, the largest market for EVs. Over time, consumer preferences for longer driving ranges drove manufacturers towards higher-density lithium nickel manganese cobalt (NMC) cathodes, which can manage longer distances on a single charge.

However, most of the cobalt used in NMC batteries comes from the Democratic Republic of the Congo, where cobalt mining is associated with several humanitarian issues. These concerns, along with the high material cost of cobalt, prompted automakers to look at alternative cathode chemistries.

This has caused automakers like Tesla to turn back to LFP cathodes, which do not require cobalt and are relatively cheaper to produce.

Lithium’s Electric Future

According to BloombergNEF, global EV sales were on track to hit 6.3 million units in 2021—nearly double the total of 2020.

However, despite recent growth, EV adoption has a long way to go, with EVs making up just 4.3% of global auto sales in 2020. This suggests that the future is bright for battery metals like lithium, which will likely continue to be in high demand.

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Electrification

How EV Adoption Will Impact Oil Consumption (2015-2025P)

How much oil is saved by adding electric vehicles into the mix? We look at data from 2015 to 2025P for different types of EVs.

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The EV Impact on Oil Consumption

As the world moves towards the electrification of the transportation sector, demand for oil will be replaced by demand for electricity.

To highlight the EV impact on oil consumption, the above infographic shows how much oil has been and will be saved every day between 2015 and 2025 by various types of electric vehicles, according to BloombergNEF.

How Much Oil Do Electric Vehicles Save?

A standard combustion engine passenger vehicle in the U.S. uses about 10 barrels of oil equivalent (BOE) per year. A motorcycle uses 1, a Class 8 truck about 244, and a bus uses more than 276 BOEs per year.

When these vehicles become electrified, the oil their combustion engine counterparts would have used is no longer needed, displacing oil demand with electricity.

Since 2015, two and three-wheeled vehicles, such as mopeds, scooters, and motorcycles, have accounted for most of the oil saved from EVs on a global scale. With a wide adoption in Asia specifically, these vehicles displaced the demand for almost 675,000 barrels of oil per day in 2015. By 2021, this number had quickly grown to 1 million barrels per day.

Let’s take a look at the daily displacement of oil demand by EV segment.

Number of barrels saved per day, 2015Number of barrels saved per day, 2025P
Electric Passenger Vehicles8,600 886,700
Electric Commercial Vehicles0145,000
Electric Buses 43,100333,800
Electric Two & Three-Wheelers674,3001,100,000
Total Oil Barrels Per Day726,0002,465,500

Today, while work is being done in the commercial vehicle segment, very few large trucks on the road are electric—however, this is expected to change by 2025.

Meanwile, electric passenger vehicles have shown the biggest growth in adoption since 2015.

In 2022, the electric car market experienced exponential growth, with sales exceeding 10 million cars. The market is expected to continue its strong growth throughout 2023 and beyond, eventually coming to save a predicted 886,700 barrels of oil per day in 2025.

From Gas to Electric

While the world shifts from fossil fuels to electricity, BloombergNEF predicts that the decline in oil demand does not necessarily equate to a drop in oil prices.

In the event that investments in new supply capacity decrease more rapidly than demand, oil prices could still remain unstable and high.

The shift toward electrification, however, will likely have other implications.

While most of us associate electric vehicles with lower emissions, it’s good to consider that they are only as sustainable as the electricity used to charge them. The shift toward electrification, then, presents an incredible opportunity to meet the growing demand for electricity with clean energy sources, such as wind, solar and nuclear power.

The shift away from fossil fuels in road transport will also require expanded infrastructure. EV charging stations, expanded transmission capacity, and battery storage will likely all be key to supporting the wide-scale transition from gas to electricity.

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Graphite: An Essential Material in the Battery Supply Chain

Graphite represents almost 50% of the materials needed for batteries by weight, no matter the chemistry.

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Graphite: An Essential Material in the Battery Supply Chain

The demand for lithium-ion (Li-ion) batteries has skyrocketed in recent years due to the increasing popularity of electric vehicles (EVs) and renewable energy storage systems.

What many people don’t realize, however, is that the key component of these batteries is not just lithium, but also graphite.

Graphite represents almost 50% of the materials needed for batteries by weight, regardless of the chemistry. In Li-ion batteries specifically, graphite makes up the anode, which is the negative electrode responsible for storing and releasing electrons during the charging and discharging process.

To explore just how essential graphite is in the battery supply chain, this infographic sponsored by Northern Graphite dives into how the anode of a Li-ion battery is made.

What is Graphite?

Graphite is a naturally occurring form of carbon that is used in a wide range of industrial applications, including in synthetic diamonds, EV Li-ion batteries, pencils, lubricants, and semiconductor substrates.

It is stable, high-performing, and reusable. While it comes in many different grades and forms, battery-grade graphite falls into one of two classes: natural or synthetic.

Natural graphite is produced by mining naturally occurring mineral deposits. This method produces only one to two kilograms of CO2 emissions per kilogram of graphite.

Synthetic graphite, on the other hand, is produced by the treatment of petroleum coke and coal tar, producing nearly 5 kg of CO2 per kilogram of graphite along with other harmful emissions such as sulfur oxide and nitrogen oxide.

A Closer Look: How Graphite Turns into a Li-ion Battery Anode

The battery anode production process is composed of four overarching steps. These are:

  1. Mining
  2. Shaping
  3. Purifying
  4. Coating

Each of these stages results in various forms of graphite with different end-uses.

For instance, the micronized graphite that results from the shaping process can be used in plastic additives. On the other hand, only coated spherical purified graphite that went through all four of the above stages can be used in EV Li-ion batteries.

The Graphite Supply Chain

Despite its growing use in the energy transition all around the world, around 70% of the world’s graphite currently comes from China.

With scarce alternatives to be used in batteries, however, achieving supply security in North America is crucial, and it is using more environmentally friendly approaches to graphite processing.

With a lower environmental footprint and lower production costs, natural graphite serves as the anode material for a greener future.

Click here to learn more about how Northern Graphite plans to build the largest Battery Anode Material (BAM) plant in North America.

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