Lithium ion Battery Price Is Likely to Become More Expensive
The price increase for lithium-ion battery began in the second half of 2021 with letters of price adjustment from the major manufacturers. Prices for lithium ion batteries have climbed by roughly 20%, particularly since the Chinese New Year. And it is constantly evolving. Prices have increased, but there is also a severe shortage of products. You typically need to pay in full up front when picking up things from manufacturers, and the delivery date cannot be guaranteed.
What is making the cost of lithium-ion battery go up indeed? Along with the epidemic, inflation, and other factors, supply and demand as well as the rise in the cost of raw materials have emerged as the primary drivers of the price increase of lithium ion batteries. We’ll talk about the causes of rising lithium prices in this passage.
Supply and Demand
As is well known, carbon emissions are one of the primary factors contributing to global warming and the greenhouse effect. In order to promote both sustainable human economic and social development and global ecological preservation, a number of nations have agreed to reduce carbon emissions, optimize their energy mix, and clearly define particular benchmarks. Lithium ion batteries are one of the energy storage solutions that are in high demand at the moment. Even though lithium ion battery output is increasing year, it still cannot keep up with the high demand on the market. A lack of supply makes the price of LifePo4 battery higher.
Electric vehicle demand is currently at all-time highs. We are all aware that electric vehicles need batteries. Major automakers were investing in battery factories and the battery supply chain, we wrote in December. We also estimated that by 2030, a factor of 20 will rise the demand for lithium. We described the warning signs for the impending electric vehicle revolution last week. The USA only has one running mine for lithium, located in Nevada, and it contributes less than 2% of the world’s lithium supply.
The moment has come. Because the price of the metal required to produce those batteries has been increasing, the price of lithium has been a hot topic in the auto industry and beyond during the past week. Bloomberg reports that the price of metal increased by 280% last year. Many metals saw price increases of more than double in the first quarter. This year, referring to Fortune, the prices of LifePo4 has increased by 438%.
Although some in the lithium business have long foreseen this price increase, those who rely on lithium for their products are nonetheless worried about it. Numerous businesses are attempting to increase the extraction and refinement of lithium, both in the United States and abroad, as noted in Forbes’ in-depth analysis of how lithium influences the cost of batteries. However, considering the difficulties and considerations involved in mining lithium, lithium mining and refinement operations can take a long time to complete. Though many of these technologies are still in their infancy, It is recently examined the potential of alternate techniques of mining and purifying lithium to make the ability greater to meet the demand of LifePo4. Others are still thinking about clean energy alternatives which don’t depend on lithium.
The cost of already available vehicles has not been significantly impacted by the rising price of lithium as of yet. It is unclear whether price rises will hinder the development of electric vehicle sales given the rise in petrol prices and overall effects of inflation. Experts are attentively observing, though, how these supply restrictions may ultimately affect demand.
Raw materials are soaring.
One of the basic components of lithium ion batteries is lithium carbonate. By December 2021, the price had increased to $1,900 per ton from $420 in January 2021 almost a fourfold rise. In addition, the price of nickel, cobalt, and other raw materials for lithium ion batteries is rising. The costs that battery makers worked so hard to bring down through their technological capabilities have been undercut by the surge in raw materials. Although the battery manufacturer signed long-term contracts, formed joint ventures to construct factories and found other means to improve the supply chain and maintain stable product costs, they ultimately had to apply pressure on the battery price hike to the downstream market. The first-class producers had first persisted in no changing for the lithium battery contract pricing in 2022, having now begun to alert their clients who have signed the contract that they intend to renegotiate the price.
The primary raw materials for lithium batteries are manganese, LifePo4, cobalt, graphite and nickel. We received notice that the price of lithium metal will increase rapidly in 2021. Between January and July of this year, the price of lithium increased by 91.4%, while the cost of cobalt, copper, and aluminum—all essential components of battery systems—rose by 63.1%, 30.3%, and 25.5%, respectively. Costs of battery cells are typically accounted for by 30-45% by raw materials like lithium and cobalt.
The trading analysis below shows that the price of lithium-ion battery cathode material is continuing to rise.
The rising demand for EVs is the source of making raw material prices higher. According to reports, 592,400 EVs were sold in total last month, a 144% increase from the same period previous year. Estimated EV sales for this year are 6.1 million units, an increase of 187% from the same period last year.
Some experts emphasized that limitations in battery supply are anticipated as a result of the rapidly expanding EV demand. In 2025, the global supply of EV batteries is probably going to run out again, and the shortage is probably going to get worse in 2026 to 2030,”
The global chip scarcity is the cause of the COVID-19 pandemic. More than 160 sectors are affected by this ongoing supply situation, which also affects the EV BMS, which was a major expense in the lithium battery system.
The price of lithium batteries is expected to remain high for the next two to three quarters due to the aforementioned considerations.
Let’s look at the expert’s significant discoveries on the essential lithium battery raw material and their assessment.
- The yearly demand for lithium-ion batteries is expected to surpass 2.7TWh by 2030, partly as a result of increased demand from passenger electric vehicles (EVs).
- Lithium well-supplied through 2025: Until at least 2025, the carbonate and hydroxide supplies should be enough. By 2027, there might be a shortage of hydrogen due to a rise in the demand for high-nickel chemistry. One significant danger is that integrated spodumene-to-hydroxide converters in Australia will account for around 35% of the estimated supply expansion between now and 2025.
- Lithium prices to continue rising but level out by 2022: In 2021, lithium prices continued to grow as a result of the pandemic’s impact on supply as well as higher demand seen in China and Europe. Prices for lithium have increased this year by 58% for spodumene concentrate, 91% for hydroxideand 71% for carbonate. Bloomberg predicts that as more supply comes online in 2021–2022, prices will continue to rise but eventually plateau.
- Nickel prices will stay constant. In order to further stimulate investment in new Class onebattery-grade nickel supply, Bloomberg predicted at the beginning of the year that the nickel market will adopt a two-tiered pricing structure. By the end of the first half of 2021, no substantial steps had been taken in the direction of this urgently needed modification to the dynamics of price in the nickel market. The price per metric ton for 2021 will probably remain around $18,000.
- Holding Cobalt price: Cobalt metal prices on the London Metals Exchange have increased by 42% year to date. It increased to $53,000 per ton in March. This price is 15% higher than the five-year average and the highest since March 2018. By the end of 2021, the price of cobalt metal might be $45,000 per ton on average. An expert anticipates prices to remain at an average of $44,000/ton up to 2025, with the market expected to be relatively in surplus this decade.
- The manganese supply is rebounding significantly. In April, manganese production in South Africa jumped by 208% compared to the same month last year. From the effects of Covid-19, the market has made a significant recovery. Despite the restart of mining operations in South Africa, the sector has faced difficulties with port operations, reliable electricity, and haulage.
- Increasing graphite demand: Demand for graphite because LifePo4 batteryis expected to increase by 37% every year to 446,914 metric tons in 2021, and by 297% by the end of 10 years. The demand for commercial cars will expand at the greatest rate, doubling annually in 2021. In total, the demand for graphite from lithium-ion batteries will amount to 446,914 tons in 2021.
The Near-term Impact
At least 30% of the price of an EV is made up of lithium-ion battery, and in recent months, the cost of the raw materials needed to create them has risen to all-time highs. The EV sector is striving towards cost parity with gas-powered vehicles, and batteries play a significant role in that equation. As a result, the reversal of the battery-price trend is concerning for electrification efforts.
According to some analysts, relative affordability won’t be attainable until EV batteries reach $100/kWh. By 2024, the expert predicted that battery pack prices would average $92/kWh, but as supply-chain constraints worsen, that prediction seeming to be less and less realistic.
What are your predictions regarding the price of lithium-ion batteries in 2022 based on the statistics from the press release?