Lithium Prices Break Fresh Record As Supply Can’t Keep Up with Demand

Lithium prices are continuing to surge as lithium carbonate has hit a fresh record of 500,500 yuan ($71,315) in China on Friday. The prices of the battery metal have more than tripled over the past year, increasing the cost of electric vehicle (EV) batteries, with recent gains driven by strong demand and disruptions at a domestic producing hub.

Consumer demand for EVs have been going strong amid a global effort to phase out fossil fuels. The China Passenger Car Association has raised its forecast for sales of EVs to a record 6 million this year, double the total in 2021, while battery usage in the nation is also expected to almost double.

Meanwhile, a power crunch during August in Sichuan province — home to more than one-fifth of China’s lithium production — caused two weeks of electricity cuts, hampering supply in an already-squeezed market.

There are concerns that China’s power crisis could return in winter when demand for heating grows. That may lead to new power shortages and hit lithium operations. But prices are expected to stay at current levels through the end of the year.

China’s Ministry of Industry and Information Technology held a meeting to review developments on Thursday and asked the top companies to help stabilize prices. Producers should not collude on pricing and not quote prices that deviate a lot from costs, the ministry said. The government will take steps to encourage exploration, stabilize imports and promote recycling.

On Thursday, SQM Chile, the world’s No. 2 lithium producer, said it predicts a “very tight market” in the coming years. SQM sees “slightly higher” prices this quarter from the previous three months and expects prices to stay at similar levels in the fourth quarter.

Both battery manufacturers and automakers have been rushing to secure reliable and stable supplies of lithium. Still, the raw-material price hikes are likely to stoke inflation concerns and add cost pressures to the supply chain.

China’s Ganfeng Lithium told customers that prices for new orders would be reassessed amid a significant increase in power-cell costs.

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