Lithium price rises threaten battery electric vehicle market

London, UK: Soaring lithium prices are fuelling concerns about the future affordability of electric vehicles.

Lithium is a crucial ingredient in batteries used in electric vehicles but prices have hit a record $78,000 a tonne. The price of Lithium has jumped more than 600% since the start of the year, from about $10,000 per metric tonne in January to $62,000 in June, according to Benchmark Market Intelligence. Citigroup has predicted more “extreme” price hikes are likely.

Rising prices have been driven by growing demand for light-duty electric vehicles, sales of which doubled to 6.3 million units last year and are projected to hit 26.7 million units by 2030, according to Platts Analytics. FastMarkets, a commodity price reporting agency, has projected that lithium supplies could collapse relative to demand as soon as 2026.

“The main takeaway here is that the EV market faces many decades of strong, compound growth,” Fastmarkets said in its most recent lithium report.

“For any supply chain that relies on getting raw materials out of the ground, it is going to be a supreme challenge to keep up with year after year of high compound growth.”

Lithium production will need to quadruple by 2030 to keep up with expected demand, according to Fastmarket but the lead time of three to seven years for new lithium mines and evaporation ponds to become productive means that any additional supply is likely to come from Australia, the world’s leading producer. Two new mines in Western Australia are planned while China, the world’s largest electric vehicle market, is also ramping up production.

But there is fierce opposition from environmentalists to lithium mining which uses large amounts of water and releases borax, potassium, and manganese into local water supplies.

The looming lithium crisis has also unleashed a wave of ‘resource nationalism’, particularly in the lithium “triangle” of South America consisting of Argentina, Bolivia and Chile, which hold 60% of known reserves, according to the US Geological Survey.

There are other technologies offering alternatives to lithium but they are some way from offering a complete solution. Matthew Hill, deputy head of chemical and biological engineering at Monash University, said that while helpful, such innovations are unlikely to replace lithium completely.

“Demand for lithium is not going to disappear any time soon. We are going into a commodity super-cycle as we electrify everything. So we’re going to have to find a balance between the environmental damage of mining lithium, compared to the environmental damage of putting more carbon into the air.”