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Surging EV sales hitting high lithium prices, supply chain constraints: experts

Highlights

Lithium-ion just part of EV costs

Alternative material sources sought

Getting permits a problem for US mines

  • Author
  • Mark Watson
  • Editor
  • Rocco Canonica
  • Commodity
  • Electric Power Metals
  • Topic
  • Battery Metals Energy Transition Environment and Sustainability

Accelerating electric vehicle adoption rates are smashing into surging lithium-ion battery costs and weakening supply chains, which is prompting calls for enhanced domestic mineral production and research in alternative battery storage technologies, experts said during an Earth Day US Energy Association media call.

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US light-duty EV sales totaled 608,000 in 2021, more than double 2020's 301,900 and almost 4% of total new vehicle sales, according to S&P Global Commodity Insights data. S&P Global expects EV sales to approach 849,000 in 2022 en route to topping 4.7 million by 2030.

Meanwhile, lithium carbonate was assessed at $75,000/mt on April 22 at Singapore, almost 12 times the $6,350/mt assessed at the beginning of 2021. Much of the world's lithium is produced in China, with which the US has had contentious trade relations in recent years.

Anne Robba, S&P Global Commodity Insights manager and research analyst for future energy, noted that while lithium prices have soared to record highs, they represent just part of the cost of EVs.

"While it is true that battery packs are the leading cost component of EVs, at around 30% of overall cost, key battery metals only account for approximately 12% of battery pack costs," Robba said in an April 22 email. "Therefore, price surges in lithium, nickel, cobalt, and other key battery metals have only lifted EV prices by 5-8%."

In contrast, Robba noted that EV battery cell prices have fallen 760% since 2015 to less than $150/KWh in 2021.

"[S&P Global] forecasts prices will experience a slight increase in 2022 before resuming their decline and falling below $100/kWh by 2026, making EV vehicles more broadly cost-competitive with [internal combustion engine] vehicles without subsidy," Robba said.

Supply constraints

However, Scott Aaronson, Edison Electric Institute senior vice president for security and preparedness, said another issue is constraints in available quantities.

"We are all seeing challenges with the supply chain," Aaronson said during the media call. "When you talk about supply chains, it's important to talk about supply and demand. Supplies right now are low. We are coming out of the pandemic. We have shipping shortages. We have material shortages. We have manufacturing challenges, and demand is through the roof, because of the clean energy transformation, because of resilience investments, because of the storms and wildfires and other natural hazards that we face."

The electric industry commonly seeks redundancies for key supply chain components, Aaronson said.

"To the extent that lithium-ion is a single point of failure, we need to look at other opportunities to prevent that failure," Aaronson said.

While President Joe Biden has invoked the Defense Production Act to facilitate the development of key resources needed for the energy transition, Ned Mamula, an economic geologist and author of the new book, "Groundbreaking! America's New Quest for Mineral Independence," said, "Unfortunately, the US doesn't produce much lithium, so ... we are very import dependent on this critical mineral."

"However, we hope that the situation changes in the very near future," Mamula said. "We have to learn how to produce them cleanly and efficiently. ... Our country has most of these resources in abundance. We cannot, however, produce them on federal land, because of permitting restrictions and regulations ... so we can't produce what we could produce."

One factor that could improve the situation would be to reduce the permitting burden on mining companies to standards comparable to other developed nations with strong environmental controls, such as Canada and Australia. Opening a mine in the US can take as long as 10 years, Mamula said, whereas it typically takes less than two years in Canada or Australia, he said.

Alternative sources, resources

In the shorter term, the US can turn to sourcing such materials from more friendly countries, Mamula said

Eric Dresselhuys, CEO of Portland, Oregon-based ESS Inc., a long-duration energy storage system manufacturer, said the existing EV battery storage supply chain involves mining cobalt in the Democratic Republic of Congo, processing it in China and shipping it in components elsewhere.

"We can improve the processing a lot faster than we can improve the mining," Dresselhuys said.

Other near-term options include recycling existing, spent resources and replacing them with other, more abundant materials, Mamula said.

Alternative energy storage systems have been gaining attention in recent months, Dresselhuys said.

"What has changed in the last six months is people who had predicted a constant decrease in the cost of lithium have said that might not be true," Dresselhuys said.