Why crashing lithium prices will not make electric cars cheaper
Among the commodities that are key to decarbonisation, lithium is in the driving seat. Dubbed “white gold”, the metal is needed to produce nearly all types of batteries powering electric vehicles (evs). A single pack typically includes ten kilograms of the stuff. In the past two years turbocharged ev sales worldwide helped boost prices twelve-fold, prodding miners to invest, carmakers to sign supply deals and governments to label it a strategic material. Most commodity prices stalled this winter, but lithium continued to ride high.
This explains why big miners are still moving forward with new projects, such as Albemarle’s $1.3bn lithium hydroxide plant in South Carolina. A slump in the share price of rivals could allow them to grow bigger. In March Albemarle offered to buy Liontown Resources, an Australian producer, for $3.7bn. Insiders expect more deal activity. Carmakers, for their part, are anxious to secure more lithium. In April General Motors said it would invest in a startup that proposes to extract metal from previously ignored deposits, the latest in a series of recent bets on lithium ventures.
A recovery in prices would disappoint carmakers. Lithium-ion battery prices have plummeted over the past decade or so, yet last year soaring metal prices helped to push up battery costs by 7%. The recent fall in lithium prices should again mean cheaper batteries, but it typically takes months for lower prices to translate into cheaper cars, by which point prices may be rising again. After a multi-year tear, white gold is taking a pause. Enjoy the pit stop while it lasts. ■
2023-04-20 10:11:14
Original from www.economist.com
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