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Lithium viability in EV batteries being challenged by high prices

11th October 2021

By: Donna Slater

Features Deputy Editor and Chief Photographer

     

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With lithium prices surpassing their 2018 peak, the increased cost of products the commodity goes into will be passed onto electric vehicle (EV) manufacturers and not necessarily battery cell manufacturers, thereby potentially leading to a cost increase in EVs in the near future, said Benchmark Mineral Intelligence strategic advisory head Andrew Leyland.

During a Financial Times Mining Summit, on October 8, he said that, although EV manufacturers had long-term lithium contracts in place, something like a doubling of the lithium prices, which was what was occurring, would directly affect the material input cost to EV makers.

“That cost push that we are seeing from lithium and other commodities is actually derailing a decades-long trend of a fall in lithium-ion battery prices; so lithium-ion battery prices are actually increasing [for] the first time this year,” said Leyland.

He added that such cost inflation would have an impact on the pricing of EVs and potentially negatively affect the uptake of EVs.

However, inflated lithium commodity prices, coupled with a persisting semiconductor shortage (impacting microchip availability) could lead to EV demand destruction as EVs simply fail to come it to market in significant quantities, or do so at elevated prices, he alluded.

In this regard, Leyland noted that lithium was not like other commodities, such as nickel, that could be sourced from other industries or even cobalt or a precious metal which were kept at large above-ground stockpiles and could be tempted back to the market.

“Lithium chemicals, particularly lithium hydroxide, have a very relatively short shelf life, so once that material is gone, it is gone [for good],” he said.

Although the EV and automotive manufacturing sector was not yet at the level of seeing demand destruction, Leyland said such a scenario was a possibility in the years ahead if a lot of the lithium projects did not come to the market relatively quickly.

SUSTAINABILITY FOCUS

Sigma Lithium co-CEO Ana Cabral-Gardner said the battery mineral mining industry was faced with four challenges.

“We need scale, and as we scale, we need to engineer high-purity quality [materials] required by EV cathode makers. In parallel, we need to achieve environmental and social sustainability, while maintaining our own cost level,” she pointed out.

She noted that, to satisfy these four fronts, was a challenge because they did not “move in the same direction”.

Nonetheless, Cabral-Gardner said it was necessary to prioritise some of these factors, while ensuring low cost. “Even though we are going through this incredible bull market, it is just a reflection of an incredible uptake in demand.”

For the EV, and by association battery minerals mining industries, to have a circular and sustainable bull market with EV uptake of greater than 50%, she alluded that EVs would have to cost less because the EV sales industry would have to tempt those hesitant of buying EVs with competitive prices.

To achieve this requires a focus on sustainability, said Cabral-Gardner. “Sustainability is one of those variables, where not having it solved could fundamentally jeopardise the future of the entire industry.”

With a focus on sustainability, EV buyers might challenge the decarbonisation credentials of EVs – which is, in essence, their main value proposition, as a vehicle, she noted.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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