The demand for power batteries has surged, and lithium prices have skyrocketed.
Since the beginning of the year, lithium prices in China have skyrocketed. According to the Wall Street Journal, the price of lithium carbonate has risen by 68% since the beginning of this year, according to data from Benchmark, a British battery raw material consulting company. As one of the essential raw materials for battery production, as of March 12th, the average market price of battery grade lithium carbonate in China is 83500 yuan per ton, an increase of 6000 yuan per ton within a week. The spot price has doubled in the past four months. At present, international lithium resources and production capacity are highly concentrated, and Chinese power batteries have a profound impact on the international market, causing many countries to pay attention to the future direction of the power battery industry.
Electric vehicle demand disrupts lithium supply balance
The Wall Street Journal reported that this price rebound marks a significant shift in the lithium market. Previously, due to overly optimistic expectations for the demand for electric vehicles, a wave of new mining investments that continued until 2018 led to an oversupply of lithium.
However, the global electric vehicle industry has remained hot since last summer. According to data from the China Association of Automobile Manufacturers, sales of electric vehicles in China more than doubled in January compared to the same period last year. According to data from the European Automobile Manufacturers Association, in Europe, sales of alternative power vehicles (including those using batteries, hybrids, and biofuels) surpassed diesel engine vehicles for the first time in the third quarter of 2020, and currently account for one-third of new passenger cars. Scott Yaham, the head of battery metal pricing at energy information agency S&P Global Platts, said that government incentives have also boosted lithium demand. Some European governments provide subsidies for electric vehicle buyers, while US President Biden has promised to build 500000 charging stations.
In this context, a shortage of lithium supply has begun to emerge. The commodity analyst at CRU, a research institution, stated that in 2020, the supply and demand balance of lithium experienced its first deficit in many years. The agency expects that lithium demand will exceed supply by about 10000 tons in 2021, and there will be a shortage of lithium production in the coming years. The Wall Street Journal believes that the surge in lithium prices may trigger a new wave of mining. Benchmark predicts that by 2024, global prices of lithium carbonate and lithium hydroxide will reach a peak of $16100 and $18800 per ton, respectively.
Global lithium resources are highly concentrated
Automotive industry analyst Zhong Shi stated in an interview with Global Times on the 15th that in China, the manufacturers that can supply lithium batteries for cars are concentrated in a few top companies, and all other manufacturers are requesting goods from them, making the supply relatively tight. Zheng Jiatu, Executive Deputy Secretary General of the China Electric Vehicle Charging Technology and Industry Alliance, told Global Times reporters that based on the current production, sales, and demand of new energy vehicles in China, there is not yet a supply-demand gap. If there is a gap, it may be due to market expectations for the future, such as the development of energy storage using lithium iron phosphate, coupled with the realization of 5G Internet of Things in the future, all industries cannot do without batteries, and there may be a significant demand for lithium in the future.
At present, the discovered lithium resources worldwide are mainly concentrated in the "Three Lakes and Seven Mines" in South America and Australia. Extracting lithium from salt lakes is easier and more cost-effective. Currently, the three major salt lakes in production are all located in South America, with Australia being the world's largest producer of lithium ore. Four energy companies, namely Albemarle, Foxconn, Talison from Australia, and SQM from Chile, account for 90% of global lithium production capacity. As a key raw material for power batteries, China is the world's largest supplier and consumer of high-performance lithium with a purity of 99.9%.
Multiple countries aim to compete with Chinese batteries
At present, the global power battery market is dominated by the production capacity of China's CATL, South Korea's LG Chem, and Japan's Panasonic. In 2020, the production, domestic sales, and exports of batteries in South Korea all increased year-on-year. Last year, South Korea's battery production increased by 20% year-on-year, with the vast majority being power batteries for electric vehicles. South Korean industry insiders believe that the biggest concern for South Korean lithium supply comes from China. With the recent surge in international lithium resource prices, South Korean companies have actively expanded their procurement to respond. LG Energy recently signed a lithium oxide supply contract with SQM Chile, supplying 55000 tons of lithium oxide annually from 2021 to 2029.
28 Japanese companies, including Sumitomo Metal Mining, will establish a new group called the Battery Supply Chain Council (BASC) in April to enhance the international competitiveness of Japan's battery industry. This will help strengthen the supply capacity of lithium batteries for vehicles.
According to media analysis, Chinese companies have already occupied 70% of the global lithium battery market share. In addition, China also has an advantage in the field of lithium battery related materials, especially in the four main materials that make up batteries, such as electrolytes, which occupy 60% -70% of the market share. Japanese companies are preparing to form a cooperative group to reduce costs and strengthen their ability to research and develop new generation batteries.
The EU joins the battery race with China! "Reported the German newspaper" Der Spiegel "on the 15th. At last weekend's EU Battery Alliance conference, the European Battery Initiative was passed and plans were made to launch a" digital battery passport ". The meeting believes that global battery demand will experience explosive growth starting from 2023. Therefore, the EU hopes to establish a standard for electric vehicle batteries produced in or entering the EU, and will also launch a "digital battery passport" to provide information on the source and recyclability of battery components. In the next 10 years, the European Union and its member states will also heavily fund electric vehicle battery projects.
Some European companies are also building their own battery production networks. On the 15th, Frankfurter Allgemeine Zeitung reported that Volkswagen is establishing its own battery factory network in Europe. According to the plan, the factory will produce a total of 240 gigawatt hours of batteries annually by 2030. By 2025, Volkswagen will also operate 18000 fast charging stations in Europe.
