Lithium, the highly reactive silver-white metal that is a crucial ingredient in batteries used in electric vehicles (EVs), is becoming much more expensive – and fast.
In April, as prices hit a record $78,000 a tonne, Tesla CEO Elon Musk floated the idea of the electric carmaker mining and refining the lightweight metal itself due to the “insane” increase in costs.
For governments ranging from China to the European Union that have pledged to phase out combustion engines in the near future, the soaring cost and growing scarcity of the metal raise questions about how they will meet their deadlines, many of which come due as soon as 2035.
With combustion engines accounting for one-quarter of carbon emissions, according to the United Nations, a delay in transitioning away from petrol and diesel cars would deal a serious blow to efforts to reduce carbon emissions and avert the worst effects of climate change.
“As Elon Musk has said, ‘lithium will be the limiting factor,’” Joe Lowry, an expert on the global lithium market and the founder of Global Lithium LLC, told Al Jazeera. “It is very simple math.”
Despite retreating from its April highs, the price of Lithium has jumped more than 600 percent since the start of the year, from about $10,000 per metric tonne in January to $62,000 in June, according to Benchmark Market Intelligence. Citigroup has predicted more “extreme” price hikes on the way.
The soaring prices have been driven by surging demand for light-duty EVs, sales of which doubled to 6.3 million units last year and are projected to hit 26.7 million units by 2030, according to Platts Analytics.
A growing appetite for lithium from manufacturers of energy storage and 5G devices, spacecraft, submarines, and safety and cooling equipment has further put the squeeze on supply. FastMarkets, a commodity price reporting agency, has projected that lithium supplies could altogether collapse relative to demand as soon as 2026.
After years of falling prices, EVs are becoming more expensive, reversing a trend that had the environmentally-friendly vehicles on track to soon be cost competitive against gasoline-powered cars.
Tesla has raised its prices by more than 20 percent since last year, putting its vehicles out of reach of millions of potential buyers.
“The main takeaway here is that the EV market faces many decades of strong, compound growth,” Fastmarkets said in its most recent lithium report.
