2023-11-06 16:25:23
The prices of key raw materials for making batteries for electric cars have fallen sharply this year. For example, the price of lithium fell by almost 70 percent and nickel has become approximately 40 percent cheaper.
Last year, the prices of so-called battery metals such as lithium, nickel and cobalt skyrocketed. Automakers were very concerned regarding long-term shortages.
CEO Elon Musk of electric car manufacturer Tesla described lithium prices at the time as “insane”. But more than a year following Musk’s comment, the market dynamics for the metals have completely reversed.
The trio of battery ingredients are among the worst-performing commodities this year due to price declines. These are partly caused by slowing sales growth of electric cars and an increase in supply from China, Indonesia and the Democratic Republic of Congo. “There’s certainly enough supply of all these commodities right now,” said commodity analyst Colin Hamilton of BMO Capital Markets.
A massive expansion of Chinese production capacity, aided by government support, is also ensuring that the supply of batteries exceeds demand.
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Prices remain low due to surplus
The lower prices may provide some cost relief for automakers and might lead to cheaper electric vehicles for consumers. Prices for lithium, nickel and cobalt are also expected to remain low for the time being.
According to consultancy Benchmark Mineral Intelligence, there will be an oversupply of the three metals in the coming years. The nickel and lithium markets will not show a shortage until 2027 and 2028, according to the agency. Demand for cobalt will exceed supply from 2026.
But there are also risks for the prices of the metals. For example, Citigroup recently warned that there is a greater chance that Indonesia, which produces more than half of the world’s nickel, will take steps to raise prices. In addition, China plans to increase its strategic stockpiles of cobalt, which is also important in the defense and space industries.
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