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Robert Rapier

Robert Rapier

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High Lithium Prices Could Last Well Into 2022

  • The rise in demand and COVID-19 related supply chain issues sent lithium prices into the stratosphere in 2021.
  • As one of the most important elements in the green energy transition, lithium demand is expected to continue growing exponentially.
  • Analysts predict that prices could climb even higher this year. 

Soaring energy prices this year have impacted people around the globe. I cited this as the Top Energy Story of 2021 in a previous column because of the impact on so many people. But it isn’t just oil and gasoline prices that have soared. Other commodity prices have soared as well. Some of the commodity price increases are because they are energy-intensive industries, and energy prices have skyrocketed. Other commodity prices have soared because of lingering supply chain disruptions that began as a result of the Covid-19 pandemic.

However, few commodities have surged this year quite like lithium.

Lithium is one of the most important elements for our transition to a lower-carbon future. Lithium batteries are replacing the fuel in combustion engines in a variety of applications. As the penetration of electric vehicles rapidly grows, demand for lithium has grown exponentially.

This is where lithium differs from oil. Demand for oil is not growing exponentially. The surge in oil prices was simply due to a return to normal demand, with a return to normal supplies lagging behind. Lithium, on the other hand, has seen a Covid-19 disruption — plus explosive demand. That combination has led to a lithium price surge that makes oil’s rise seem tame in comparison.

According to S&P Global Platts:

“Seaborne lithium carbonate prices have gained 413% since the start of 2021 to $32,600/mt CIF North Asia on Dec. 14, while lithium hydroxide prices have climbed 254% over the same period to $31,900/mt CIF North Asia, according to S&P Global Platts data.”

In comparison, the price of West Texas Intermediate (WTI) is currently 61% higher than it began the year, although it was up 78% in October before pulling back. But that’s relatively mild in comparison to the triple-digit gains of lithium prices.

Related: OPEC+ Sticks To Plan To Add 400,000 Bpd Oil Production In February

Conventional wisdom in recent years had been that lithium prices would continue to fall as the lithium battery industry continued to scale. But Reuters recently reported that soaring costs “are starting to feed through into prices of these batteries in China.”

I was curious about how the rising cost of lithium is impacting the lithium battery industry in the U.S., so I asked Alex Pisarev, the CEO of California-based lithium-ion battery supplier OneCharge.

“The recent lithium price spike indeed has had an impact on our business,” Pisarev told me. “Our costs are growing faster than the prices, and in parallel the component quality is deteriorating. Consequently we have to absorb even more service-related costs. Some components become unavailable, and we have to increase investments in engineering instead of outsourcing.”

I also asked about the root cause of the supply chain issues impacting the lithium industry. Pisarev explained “The key underlying issue of the current supply chain bottleneck are COVID-related multiple imbalances in manufacturing in Asia and other major markets, aggravated by crude state interference in these regions. The market is still struggling to find a new balance.”

But relief isn’t expected just yet. The issues impacting the lithium battery industry are expected to last well into 2022.

In the next article, I will discuss these issues in light of the U.S.-China rivalry in the lithium battery space.

I want to take a moment to thank you for reading, whether you are a regular reader, or if this is the first time you have encountered one of my articles. I wish you a safe, happy, and prosperous 2022.

By Rober Rapier

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