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EVs drive lithium’s red hot rally
May 26, 2022 - Demand for lithium, the metal at the heart of the shift to electric vehicles, has outstripped supply, pushing prices up more than 500% in a year and potentially adding $1,000 to the cost of an EV.
Elon Musk’s Tesla Inc. and three of China’s automakers -- BYD Co., Xpeng Inc. and Li Auto Inc. -- have raised vehicle prices.
“Price of lithium has gone to insane levels!” Musk tweeted last month, “Tesla might actually have to get into the mining & refining directly at scale, unless costs improve.”
Demand has outstripped supply, pushing prices up by 558 per cent since June 2021. Last year industry needed 504,000 tonnes, outstripping the supply of 497,000 tonnes, and S&P Global Market Intelligence predicts demand will jump even higher to 641,000 tonnes in 2022, while supply is forecast to trail at 636,000 tonnes.
Australia is the world’s largest producer of lithium, producing 53 per cent, followed by Chile (25%), China (14%) and Argentina (6%). The quickest way to increase supply is for these countries to raise production capacity. Australia’s Pilbara Minerals Ltd. plans to boost production at its Pilgangoora mine in Western Australia by more than 50% later this year.
Another potential source of lithium is from recycling old batteries -- this could eventually supply up to 16% of demand, but large scale recycling will not start until 2030, according to BloombergNEF.
“Basically, there’s just not enough batteries to be recycled right now,” said Ken Hoffman, senior expert at McKinsey & Co. “There is no great way to recycle a battery today,” Hoffman added.