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High Battery Metal Prices Could Derail The EV Revolution

Recent rallies in the prices of key battery metals such as lithium and cobalt could slow down the adoption of electric vehicles (EVs) as higher input costs could mean that battery pack prices may not continue to fall as steeply as analysts have predicted.  

So far this year, the growing demand for EVs and the numerous statements from major legacy automakers about focusing on electric mobility have sent the prices of the key metals lithium and cobalt soaring.

In recent months, the lithium market has shown signs of reversing the slump of the past two-to-three years, and prices have jumped. Prices of cobalt have also surged this year.

Although these higher prices could mean more investment from major battery metal producers in increased mining of the key minerals, the higher prices also mean higher costs for battery pack makers as the prices of their raw materials are rising.

“If lithium and other high-cost inputs, such as cobalt and nickel, enter periods of sustained higher pricing, this would eventually take its toll on the ability of battery producers to keep lowering costs,” Cameron Perks, a senior analyst at Benchmark Mineral Intelligence, told Bloomberg.

Battery costs have fallen by 89 percent in real terms since 2010, to $137 per kilowatt-hour (kWh) in 2020, according to BloombergNEF’s annual battery price survey from December.

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However, additional cost declines will be necessary so that EV prices could erase the current price advantage of conventional cars. 

Further cost reductions in battery pack prices could allow EVs to compete with ICE cars when battery pack prices drop to $100 per kilowatt-hour in 2023, according to BNEF.

“If prices for raw materials were to return to the highs seen in 2018, it would only delay average prices reaching $100/kWh by two years – rather than completely derailing the industry,” said James Frith, BNEF’s head of energy storage research and lead author of the report.

By Tsvetana Paraskova for Oilprice.com

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