..this article may be a couple of months old, but reinforces my message not to be misguided that continued EV growth must be synonymous with lithium pricing growth.
..the reality is that lower for longer lithium price will be more accommodative for a more sustained EV growth as the biggest hurdle for EV adoption is Cost$.
Falling Lithium Prices Are Making Electric Cars More Affordable
An unexpected decline in the price of an essential battery material, along with those of other commodities, is good news for buyers. But experts disagree on how long low prices will last.
Lithium, the common ingredient in almost all electric-car batteries, has become so precious that it is often called white gold. But something surprising has happened recently: The metal’s price has fallen, helping to make electric vehicles more affordable.
Since January, the price of lithium has dropped nearly 20 percent, according to Benchmark Minerals, even as sales of electric vehicles have soared. Cobalt, another important battery material, has fallen by more than half. Copper, essential to electric motors and batteries, has slipped about 18 percent, even though U.S. mines and copper-rich countries like Peru are struggling to increase production.
The sharp moves have confounded many analysts who predicted that prices would stay high, or even climb, slowing the transition to cleaner forms of transportation, an essential component of efforts to limit climate change.
Instead, the drop in commodity prices has made it easier for carmakers to cut prices for electric vehicles. This month, Tesla lowered the prices of its two most expensive cars, the Model S sedan and Model X sport utility vehicle, by thousands of dollars.
That followed cuts in January by Tesla to its more affordable Model 3 and Model Y, and by Ford Motor to its Mustang Mach-E. The average price of an electric vehicle in the United States fell $1,000 in February compared with January, according to Kelley Blue Book.
“For electric vehicles, the major roadblock is cost,” said Kang Sun, the chief executive of Amprius Technologies, a young battery maker that this month announced plans for a factory in Colorado. The falling price of lithium, he said, “is going to promote E.V. sales.”
Dr. Sun thinks prices could fall much further because demand for the metal has not risen as fast as some in the industry expected.
As with any commodity, there is a wide range of opinion on what has caused the recent drop in prices and on how much lithium will cost in the coming months and years.
Some analysts said the falling price of lithium was caused by short-term factors like slowing sales growth in Europe and China after subsidies for electric car purchases expired. But other industry experts said the drop suggested that new mines and processing plants were solving the lithium problem sooner than many analysts had thought was possible.
Even after falling so much, lithium prices remain so high that mining and processing the metal is an unusually profitable business. The metal, uniquely suited for batteries because of its ability to store energy, costs about $5,000 to $8,000 per ton to produce. It sells for 10 times that amount, according to Mobility Impact Partners, a New York private equity firm that invests in the electric vehicle industry, among other areas.
Given those fat profit margins, investors and banks are eager to invest in, or lend to, mining and processing projects. The federal government is awarding grants worth tens of millions of dollars to lithium prospectors and processors.
“You can’t have profit margins that are 10 times what it costs to extract,” said Shweta Natarajan, a partner at Mobility Impact Partners who has analyzed the lithium market. “You will see that come down.”
“Financing is very easy to come by,” Ms. Natarajan added. “There is no reason to think you wouldn’t have new projects opening up to meet any shortages.”
But others, including members of the Biden administration, are less confident. The supply of lithium has to increase 42-fold by 2050 to support a transition to clean energy, said Jose W. Fernandez, the under secretary for economic growth, energy and the environment at the State Department.
“We have to find additional sources of supply because 42 times is a lot,” Mr. Fernandez said in an interview. “Right now, we don’t have enough.”
There is plenty of lithium in the world. But it was not considered very valuable until sales of electric vehicles began to take off in the last few years. As demand soared, the industry rushed to start new mines, and refineries increased their capacity to process the ore.
“The mining is not what is driving the costs,” said Bold Baatar, the chief executive of the copper production unit at the mining giant Rio Tinto. “It’s the availability of processing facilities.”
Most lithium refineries are in China, and few managers and engineers outside that country know how to build processing plants. Beijing’s near-monopoly on an essential resource alarmed the Biden administration, which has allocated billions of dollars to encourage companies to develop lithium mines and refineries in the United States or in countries with which it shares close political and economic ties.
Supplies of lithium and other critical materials are a national security issue, Mr. Fernandez said. Last year, the administration established the Minerals Security Partnership, he said, a group that includes the European Union and 12 industrialized nations, including Australia, Japan and Britain, to locate mining opportunities and financing, and to promote recycling.
