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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

Visualizing the Supply Deficit of Battery Minerals (2024-2034P)

A surplus of key metals is expected to shift to a major deficit within a decade.

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This graphic represents how key minerals for batteries will shift from a surplus in 2024 to a deficit in 2034.

Visualizing the Supply Deficit of Battery Minerals (2024-2034P)

The world currently produces a surplus of key battery minerals, but this is projected to shift to a significant deficit over the next 10 years.

This graphic illustrates this change, driven primarily by growing battery demand. The data comes exclusively from Benchmark Mineral Intelligence, as of November 2024.

Minerals in a Lithium-Ion Battery Cathode

Minerals make up the bulk of materials used to produce parts within the cell, ensuring the flow of electrical current:

  • Lithium: Acts as the primary charge carrier, enabling energy storage and transfer within the battery.
  • Cobalt: Stabilizes the cathode structure, improving battery lifespan and performance.
  • Nickel: Boosts energy density, allowing batteries to store more energy.
  • Manganese: Enhances thermal stability and safety, reducing overheating risks.

The cells in an average battery with a 60 kilowatt-hour (kWh) capacity—the same size used in a Chevy Bolt—contain roughly 185 kilograms of minerals.

Battery Demand Forecast

Due to the growing demand for these materials, their production and mining have increased exponentially in recent years, led by China. In this scenario, all the metals shown in the graphic currently experience a surplus.

In the long term, however, with the greater adoption of batteries and other renewable energy technologies, projections indicate that all these minerals will enter a deficit.

For example, lithium demand is expected to more than triple by 2034, resulting in a projected deficit of 572,000 tonnes of lithium carbonate equivalent (LCE). According to Benchmark analysis, the lithium industry would need over $40 billion in investment to meet demand by 2030.

MetricLithium (in tonnes LCE)Nickel (in tonnes)Cobalt (in tonnes)Manganese (in tonnes)
2024 Demand1,103,0003,440,000230,000119,000
2024 Surplus88,000117,00024,00011,000
2034 Demand3,758,0006,082,000468,000650,000
2034 Deficit-572,000-839,000-91,000-307,000

Nickel demand, on the other hand, is expected to almost double, leading to a deficit of 839,000 tonnes by 2034. The surge in demand is attributed primarily to the rise of mid- and high-performance electric vehicles (EVs) in Western markets.

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Visualizing the EU’s Critical Minerals Gap by 2030

This graphic underscores the scale of the challenge the bloc faces in strengthening its critical mineral supply by 2030.

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This graphic underscores the scale of the challenge the EU faces in strengthening its critical mineral supply chains under the Critical Raw Material Act.

Visualizing EU’s Critical Minerals Gap by 2030

The European Union’s Critical Raw Material Act sets out several ambitious goals to enhance the resilience of its critical mineral supply chains.

The Act includes non-binding targets for the EU to build sufficient mining capacity so that mines within the bloc can meet 10% of its critical mineral demand.

Additionally, the Act establishes a goal for 40% of demand to be met by processing within the bloc, and 25% through recycling.

Several months after the Act’s passage in May 2024, this graphic highlights the scale of the challenge the EU aims to overcome. This data comes exclusively from Benchmark Mineral Intelligence, as of July 2024. The graphic excludes synthetic graphite.

Securing Europe’s Supply of Critical Materials

With the exception of nickel mining, none of the battery minerals deemed strategic by the EU are on track to meet these goals.

Graphite, the largest mineral component used in batteries, is of particular concern. There is no EU-mined supply of manganese ore or coke, the precursor to synthetic graphite.

By 2030, the European Union is expected to supply 16,000 tonnes of flake graphite locally, compared to the 45,000 tonnes it would need to meet the 10% mining target.

Metal 2030 Demand (tonnes)Mining (F)Processing (F)Recycling (F)Mining Target Processing Target Recycling Target
Lithium459K29K46K25K46K184K115K
Nickel403K42K123K25K40K161K101K
Cobalt94K1K19K6K9K37K23K
Manganese147K0K21K5K15K59K37K
Flake Graphite453K16K17KN/A45K86KN/A

The EU is also expected to mine 29,000 tonnes of LCE (lithium carbonate equivalent) compared to the 46,000 tonnes needed to meet the 10% target.

In terms of mineral processing, the bloc is expected to process 25% of its lithium requirements, 76% of nickel, 51% of cobalt, 36% of manganese, and 20% of flake graphite.

The EU is expected to recycle only 22% of its lithium needs, 25% of nickel, 26% of cobalt, and 14% of manganese. Graphite, meanwhile, is not widely recycled on a commercial scale.

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