Carmakers racing for lithium have been ‘asleep at the wheel’

Some analysts have warned that the extraordinary price increases on battery ingredients, including lithium, will force carmakers to raise the cost of electric vehicles, increasing the threat of destroying demand.

The cost of electric cars can rise on the back of persistent peaks for the price of lithium.Credit:Shutterstock

“Historically, the price curve for batteries had fallen at a rate of 3 to 7 percent annually for so many years in a row that it seemed almost inevitable,” said investment bank analyst Morgan Stanley.

“The world has changed, and with it comes a new paradigm of input costs.”

End users of crude lithium products in the US and Europe have longer contracts that are less exposed to the balloon price of lithium and other chemicals, while China’s battery players are exposed to higher prices.

Mr Brinsden, who said that 90 percent of Pilbara’s product went to China, believes that this could affect the price of electric cars in the short term, but claims that problems with the supply chain are pushing up the price of most new vehicles.

Scanning

“Are you really worried about paying $ 3,000 more for an electric car? I think the answer is no,” he says.

UBS analyst Lachlan Shaw said lithium prices were “at or near record levels” and were expected to remain high as indicators of consumer interest in electric cars continued to “go from strength to strength”.

“The order books for buying an electric car in Europe are now well into 2023, so you have to wait over a year to get an electric car in some cases,” said Shaw.

Australia is the world’s largest producer of lithium and accounts for an estimated 30 percent of known resources.

Brinsden says that unlike North Asia, Australia will not be a powerhouse for battery production but will need to invest in adding value to lithium and reducing waste to access markets in the US and Europe.

“The current spodumen solution will not reduce it when you deliver 95 percent of waste to Europe and they have to store it somewhere in their backyard,” he said.

The federal government has prioritized funding to expand Australia’s critical minerals sector, including support for projects to seize opportunities to grow the country’s lithium hydroxide refining capacity.

The Market Recap newsletter is a summary of today’s trading. Get it every weekday afternoon.

Leave a Comment