The cost of electric cars could begin to fall as the price of a core component in EV batteries is expected to fall, according to market analysts Credit Suisse.
Most important points:
- Lithium is an important part of the batteries used in electric cars and energy storage in the home
- Lithium prices hit record highs as demand outpaces supply
- But now the supply is increasing and this could lead to lower prices for battery manufacturers
Lithium is not only used in EV batteries, but also in home solar energy storage and large batteries.
The market price of the mineral’s raw ore has risen to about $6,000 ($8,300) per tonne as the shift to renewables accelerates at a time when supply is still trying to catch up.
“Prices have gone through the roof,” Saul Kavonic, Credit Suisse’s chief of energy research, told ABC News.
“The scarcity we see in lithium right now is fundamentally not a good thing.
But now many more lithium mines are being built, including in Australia.
“We have seen many new mines put into production, boosted by the high prices,” said Mr Karovic.
And the cumulative effect of all those mines hunting a tree can make them get a lot less for the hard white mineral they dig up.
Credit Suisse is one of several companies that have just revised their lithium price forecasts as supply increases and battery demand does not rise as quickly as predicted as key markets such as China grapple with an impending economic downturn.
By the end of next year, Credit Suisse now predicts the spot price will fall in half to $2,500 ($3,470) per tonne.
“We might see the market return to equilibrium or even a surplus in the next 18 months,” said Mr. Karovic.
What does this mean for the viability of lithium mines?
Credit Suisse is not the only market analyst predicting a decline in lithium prices.
Last week, lithium mining stocks on the ASX slumped as a slew of major companies, including Bell Potter and Goldman Sachs, released revised price predictions.
Goldman Sachs predicts a “sharp correction” in lithium prices, according to media reports.
Macquarie Group’s forecast is less optimistic, with analysts believing prices will remain elevated for longer as demand for electric cars continues to rise. However, it also believes that lithium prices in China have peaked.
Falling prices have a major impact on the Australian economy and taxes on mining revenues.
We are already the world’s largest exporter of lithium, and production is expected to triple within four years, according to the federal government’s March forecasts.
Core Lithium is one of the new mines under construction here.
The ASX-listed company made an appeal to continue the mine near Darwin late last year, when lithium prices really started to rise.
Chief Financial Officer Simon Iacopetta believes the forecasts of Credit Suisse and Goldman Sachs price declines have been exaggerated.
“We expect the shortage of supply or new products coming to market will result in continued strengthening of [prices] for the short term,” Iacopetta said.
However, Mr. Iacopetta told ABC News that the mining project’s feasibility was based on a long-term forecast of prices dropping to $1,000 for the spodumene concentrate lithium ore it sells on the market.
“We should be selling in a fairly positive pricing environment and generating healthy margins,” he said.
Core Lithium has locked up two buyers in China. It is also one of many mines across Australia that has signed early deals with one of the biggest names in batteries, Tesla†
“There have been many occasions to celebrate and that was one,” Iacopetta said.
“I think the shift to decarbonization is gaining momentum and will continue to do so.”
Falling mineral prices could make EVs more affordable
Saul Kavonic of Credit Suisse said no miner could count on an ongoing boom, and those who still have clout should assess their future viability.
“For miners still in pre-production, there is a clear risk profile going forward,” Mr Kavonic said.
“Australia’s lithium miners are doing absolutely brilliantly, seeing record margins surpassing the wildest dreams the industry could have had just 12 months ago.
“Those margins are not sustainable. They will come down in time. We can discuss how good that timing is, but they will have to come down.
“But it must be remembered that Australia’s lithium miners are highly productive, low-cost mines that should be able to survive through the cycle.”
Lowering prices is a good thing, added Mr Kavonic.
“Each [price relief] will reduce the cost of batteries and lower the cost of electric vehicles, which will help the global rollout of electric vehicles,” said Mr. Kavonic.
†[That’s] will eventually have positive moves on the trajectory towards the decarbonisation goals, and net zero by 2050, which many countries in the world have joined.”
The Australian lobby group for the use of electric cars agrees.
“We expect that drop in mineral prices will contribute to the falling price of electric vehicles,” said Behyad Jafari, CEO of the Electric Vehicle Council.
“As we’ve seen the price of those lithium-ion battery packs drop, we’ve seen the price of electric vehicles drop as a result. That had slowed down somewhat and we expected it to slow down because there’s a bit of a supply crisis with the minerals.
“But again, as the extraction and refining capacity of those minerals has increased, we are now seeing prices start to fall again.”
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