As we mentioned earlier this month, analysts did not anticipate a substantial rise in lithium-ion battery (LIB) prices in 2022, which were projected to grow only 2% YoY. However, more recent estimates suggest that growth may be higher than expected in June. According to a survey released by BloombergNEF in early December, LIB prices have climbed 7% from last year to $151/kWh amid soaring costs (see Fig. 1).
Indeed, lithium, a key component in batteries, hit a new high of $84,500 per tonne in mid-November, while its average price this year stood at $71,600 per tonne (see Fig. 2), up 279% and 1,023% from 2021 and 2020, respectively.
Lithium prices depend largely on the situation in China as a dominant player in terms of both supply and demand, holding 7.9% of the world’s lithium reserves and some 60% of processing and refining capacity. At the same time, local carmakers are starkly short of batteries, with their output rising only 1.1% YoY (see Fig. 3). Though demand for batteries and components is outpacing supply, manufacturers are struggling, as they rely on increasingly expensive feedstock sourced from Chile, Australia and Argentina.
Some experts claim that lithium prices will stay high throughout the whole of next year and may only ease in 2024 as more extraction and refining capacity comes online. By contrast, a major Chinese carmaker expects the tight lithium market to swing back into surplus as early as in 2023, despite surging demand observed in the past few years, while Benchmark Mineral Intelligence forecasts supply at nearly 863,000 tonnes, up 36% from this year, with the deficit narrowing to 5,000 tonnes from the current 80,000 tonnes.
By the looks of it, there’ll be enough lithium in the near future, though it’s not clear for how long as transition to e-mobility gains momentum, while capital spending on new mining projects is anticipated to fall.