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The battery metal China is really worried about is lithium, not nickel

The battery metal China is really worried about is lithium, not nickel

(Bloomberg) —

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Nickel has gotten a lot of the attention among battery metals in recent weeks, and understandably so. Wild price swings, including an unprecedented 250% advance over two trading sessions in a short period of time, and concerns over Russia’s role as a key supplier have added to long-standing worries among automakers. automobiles with regard to the sufficient securing of the equipment.

Still, it’s another metal that worries the world’s largest electric vehicle market.

Last month, the Chinese government brought together a range of market players for two days of talks focused on halting a surge in lithium, the metal that is vital to nearly all rechargeable batteries and essential to the deployment of emission-free cars and clean energy.

Lithium carbonate in China jumped about 472% from a low last June to a record high on March 15, according to price provider Asian Metal Inc. A global lithium price index compiled by Benchmark Mineral Intelligence has jumped almost 490% over the past year.

At the March seminar, which included industry groups, raw material suppliers and battery manufacturers, China’s Ministry of Industry and Information Technology demanded “a rational return” to higher lithium prices. typical. Discussions focused on supply bottlenecks, pricing mechanisms and what officials described as the healthy development of the country’s new energy vehicle and battery sectors.

While similar interventions to manage soaring commodity prices have been common for coal and steel, this is a rare step in the electric vehicle sector and underscores Beijing’s nervousness over the impact of rising lithium costs.

As my colleague Danny Lee wrote earlier on Monday, automakers are already grappling with commodity price increases. Several raised sticker prices in response. By making electric models too expensive, they risk slowing the pace of adoption.

“The industry is facing a very strong headwind from escalating costs,” Brian Gu, president of Xpeng Inc., told Bloomberg Television last week. The Guangzhou-based automaker last month raised the price of its vehicles to between 10,100 yuan ($1,572) and 20,000 yuan.

Automakers are suffering from “opportunistic price hikes” for lithium products, Nio Inc. founder William Li said in an earnings call last month. He urged suppliers to consider the impact of rising costs on the development of the electric vehicle industry.

The challenges for the sector follow decisions to slow down or halt expansions and new projects during a two-year lithium price slump through mid-2020. That, combined with the disruptions from Covid-19, means that additions to supply simply cannot keep pace with growing needs.

Lithium demand will quintuple by the end of the decade, according to BloombergNEF. About $14 billion in investment is needed to fund lithium resources and refining capacity by 2025, plus another $5 billion by 2030, according to BNEF forecasts.

There are signs that governments, producers and consumers now recognize the magnitude of this task.

Tesla Inc. signed two recent supply deals with developers of future projects in Australia, while Ganfeng Lithium Co. – one of the world’s largest producers – said last week it would use record profits to support a huge expansion program, aiming to provide an eventual capacity of 600,000 tonnes of lithium carbonate equivalent, compared to production of approximately 89,000 tonnes currently.

Chinese officials have called for faster development of a domestic lithium sector that already dominates global production, pointing to growth prospects in Qinghai, Sichuan and Jiangxi provinces. In the United States, President Joe Biden last week added battery metals, including lithium, to a list of items covered by the Defense Production Act, meaning companies can access financing to increase their production or to study potential new developments.

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