The price of lithium, a key component in the production of electric car batteries, has surged by nearly 500% since last year, with supply unable to meet the demand for the rare earth metal.
The West’s efforts to create a low-carbon future through the introduction of electric vehicles will bear a heavy cost as demand soars for lithium carbonate, which is used in manufacturing EV batteries and other low-carbon energy resources like solar panels.
In addition to costing almost 500% year-over-year, the price has jumped 95% in 2022 alone, Benchmark Mineral Intelligence, a price reporting agency reported that battery-grade lithium-carbonate averages at $76,700 a ton in mid-March. At the same time last year, the rare earth traded at a mere $13,400 a ton.
Blaze News reports that Benchmark based its findings on reports from China, noting that the prices are not going to improve in the short term due to continued low inventory levels. China is a major producer of the rare earth and constitutes nearly 20% of the world’s supply.
Amid the war in Ukraine, nickel, another metal that serves as a key component in EV batteries, has seen a massive price surge, with prices doubling in less than a day on March 8, CNBC reported. While prices have stabilized, nickel remains at an inflated cost.
Russia is the third-largest producer of nickel.
"The price explosion tells you that lithium supply is simply nowhere near enough to feed this demand surge," OilPrice.com reported.
S&P Global reported in January that the supply of lithium has no chance of catching up with the increasing demands for the rare earth, and that “a lack of investment in new supply in previous years, might generate a structural deficit throughout this decade, data from the expected supply vs. the expected demand (both until 2030) demonstrates.”
"Although the battery industry has been investing significantly in downstream battery capacity to power the surging EV demand, lithium is still getting less funding than required — and such investment could be too late to prevent a structural deficit in the coming years," S&P reported.
Despite the shortage of lithium and nickel, the Biden administration continues to push electric vehicles and renewables like solar energy as a replacement for petroleum and other fossil fuels. The Biden administration and its European counterparts have shown an unwillingness to pursue nuclear energy as a suitable alternative due in large part to environmentalists who oppose such measures.
Earlier in March, Vice President Kamala Harris and Transportation Secretary Pete Buttigieg argued that the adoption of “clean transportation” will bring cost savings for average Americans struggling to pay for gas.