I found this post by Alex Kimani at OilPrice.com on the rising price of lithium Interesting:
The energy transition is driving the next commodity supercycle, with immense prospects for technology manufacturers, energy traders, and investors. Clean energy technologies require more metals than their fossil fuel-based counterparts, with prices of green metals projected to reach historical peaks for an unprecedented, sustained period in a net-zero emissions scenario. After surging 500% over the past year, lithium prices have continued their meteoric rise in China, with Chinese lithium carbonate prices climbing 35% month-on-month thanks to a jump in electric-vehicle registrations.
According to the China Automotive Technology and Research Center via Bloomberg, nearly 400,000 EVs were registered in the country in December, with Tesla Inc. (NASDAQ: TSLA) supplying about 18% of the total.
But with lithium prices blowing past previous records, there’s a growing risk that greenflation could start posing formidable headwinds for the burgeoning industry.
My back-of-the-envelope calculation suggests that a price increase of 500% in lithium should result in a roughly 10-15% increase in the cost of an EV battery. That’s not a killer but it is a factor and does through cost projections into a cocked hat. And it certainly offsets cost decreases due to improvements in technology.
Different people will draw different conclusions from it. The countries with the largest known reserves of lithium are, in descending order, Bolivia, Argentina, Chile, U. S., Australia, China. Under the circumstances I find if unconscionable that we should be dependent on Chinese production of lithium. We should be producing our own damned lithium.
â€Under the circumstances I find if unconscionable that we should be dependent on Chinese production of lithium. We should be producing our own damned lithium.â€
We should not be dependent on China for a lot of things – transformers, drugs etc. But then again, the Biden family has made a large sum of money, via the Chinese ( some $31 million according to Schweitzer’s deep dive book). So, I doubt they will do much to help this country gain any manufacturing independence. Just look at what the Biden Administration did to our energy independence!
I don’t have a sense to car pricing and margins.
But 10% increase in total price response to a 500% increase in material costs could be taken different ways.
If lithium prices are in a bubble and are well out of historical norms and above production costs; then EV’s are in a good place. But if this is just the beginning of the trend, well then watch out.
Through the price volatility is itself a bit worrying. Generally new car prices are set on a yearly basis. To have costs go up by 10% during the year would make that practice unviable.
1. Lithium prices ARE outside recent norms.
2. Time will tell whether it’s the beginning of a trend.
I don’t think that a) we can allow China to set prices and b) price volatility is hard on long range planning.