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Electric cars: Global rush for lithium set to spark first rise in cost of EV batteries after UK climate pledge – iNews


It is the UK’s most eye-catching commitment to a carbon neutral future – in just eight years almost all new cars sold here will be electric.

The pledge is part of a global transformation of the auto industry. From 2030 the sale of new petrol and diesel cars will be banned not only in the UK, but also in Canada, New Zealand, the Netherlands and Ireland, to name just a few.

Meanwhile major manufacturers like General Motors, Ford, Mercedes-Benz and Volvo have set their own dates for going all electric.

But it is now emerging that this huge shift could have huge knock-on consequences.

Analysts are warning that the cost of electric car batteries is set to rise this year for the first time ever, in a reversal of the usual trend for green technology to become cheaper. 

And in the longer term it could trigger an earthquake in the global car economy, leaving China as the dominant supplier of electric vehicles (EVs).

Driving these shifts is a race for control over the world’s lithium, a core ingredient for EV batteries.

Last month the new play, Rare Earth Mettle, at London’s Royal Court Theatre, dramatised this battle with a not-so-subtle version of Elon Musk trying to secure the rights to mine lithium in Bolivia.

However it is not American billionaires who are leading the real world race for the metal, but a cluster of little-know Chinese companies with very deep pockets.  

The race for cheap lithium is the central focus of new play Rare Earth Mettle at the Royal Court Theatre (Photo: Helen Murray)

Over the last 10 months Chinese firms such as Ganfeng Lithium, Zijin Mining, and Chengdu Tianqi Industry Group have been on an “acquisition blitz”, according to analyst house SP Global.

By October 2021, Chinese companies had acquired 6.4 million tonnes of lithium reserves and resources, matching what all companies across the globe spent on securing future lithium supplies throughout the whole of 2020. 

Their acquisitions stretch far and wide across the globe, from Argentina to Mali, Australia, Canada, the DRC, Mexico, and Chile. Over the last decade, Chinese firms have spent more than $6bn on lithium deals.

Analysts say the buying frenzy is part of China’s long-term plan to dominate the global EV market.  

Chinese firms have already invested heavily in lithium processing and battery manufacturing capability, points out Henry Sanderson, executive editor of Benchmark Mineral Intelligence.

Securing access to raw supplies is the next part of the puzzle, he explains. “China is not blessed with loads of domestic lithium, but what China has really done is control the processing of lithium,” he tells i. “As a result it needed to go overseas to get resources.” 

Assuming Chinese carmakers can hit on the right design and price point, Chinese EVs could become a common sight on British streets within a few years, he suggests. “China has become a centrifugal force that sucks in everything in the [lithium] supply chain,” he tells i. “China’s dream is to export EVs with Chinese-made batteries and components to the world.” 

China’s dream is to export EVs with Chinese-made batteries and components to the world, say analysts (Photo: Gilles Sabrie/Bloomberg via Getty Images)

But China is not alone in rushing to expand lithium supply chains. The deadlines for banning new petrol and diesel cars – the EU has set its own for 2035 – have sparked a huge surge in EV sales. This has in turn driven lithium prices sky-high as Western firms rush to secure their supply chains. The price of lithium carbonate is now almost $24,000 per tonne, up 290 per cent in a year.  

“Prices have risen in 2021 and that is due to demand growing faster than supply can keep up,” says Seth Goldstein, senior equity analyst at Morningstar. That is good news for lithium miners who are reaping huge investments for new projects, he notes. 

“Every day it seems like there’s another announcement, with more and more capital going into lithium, more and more projects are being acquired or bid for. It seems like the industry has finally woken up and realised that now is the time to be getting into new lithium assets.” 

But in the short term at least, it could be bad news for EV makers, who rely on falling prices to make their vehicles appealing to the mass market. For the last 20 years battery prices have been falling rapidly, the main driver behind the falling cost of electric cars. But if lithium’s price rally continues – and analysts see little sign of it coming to an end – then that trend will reverse.  

Analysis from BloombergNEF suggests average battery prices could rise by $3 per kWh in the first half of 2022, the first price increase for lithium batteries since BloombergNEF started tracking the data in 2010. 

“The rising cost of commodity prices would certainly start biting the battery industry in the first half of 2022 if the price rally continues,” says Dr Kwasi Ampofo, head of metals and mining at BloombergNEF. 

Rising battery prices could put the brakes on cheap EVs. In 2020 Bloomberg predicted electric vehicles will be as cheap as internal combustion engine cars in the US by 2024. More expensive batteries, the single most expensive part of an electric vehicle, could push that date back.  

Speak to those representing the lithium industry itself, and they urge calm.  

Prices will fall when new lithium supply comes onstream in a year or two’s time, says Anand Sheth, founding chairman of the International Lithium Association (ILiA), which formally launched in September.

“Things grow fast but not everything co-ordinates. Different parts of the supply chain grow at different times,” he tells i. “It’s just a matter of catch-up…There’s a short-term supply and demand issue. But this is not something that is going to be a permanent situation.” 

Yet others talk of years, decades even, of high prices, driven by ever-growing demand for EVs. The real Elon Musk predicts automakers will be churning out 30 million electric cars a year before the end of the decade. That will require the global lithium mining industry to quintuple from its current size.  

Cheap, plentiful lithium is the holy grail of the electric revolution. Affordable electric cars depend on it. But as the global race to secure supplies intensifies, the road to low-cost EVs is looking a little bumpy.

The hunt for Cornish lithium

Cornish Lithium is drilling test cores in Cornwall to assess the potential for mining in the county (Photo: iNews)

With demand for new supplies of lithium at fever pitch, a handful of pioneering companies are hoping to revive Cornwall’s once world-leading mining industry and put the county at the centre of the electric revolution.  

“The whole lithium industry has become an arms race,” says Jeremy Wrathall, CEO of Cornish Lithium, one of the companies hoping to establish Cornwall as a hotspot for domestic supply. “This is a megatrend.” 

Cornwall’s landscape is blessed with significant quantities of lithium, which is buried within dusty rocks and briny waters. The challenge is to make money extracting it.

Cornish Lithium is drilling in a couple of spots in the hopes of finding enough lithium to start full-scale operations. Nearby are rivals British Lithium, which recently announced the successful production of lithium carbonate from the mica in Cornwall’s granite bedrock.

Both firms predict they could be producing significant quantities of lithium by the middle of the decade, if all goes to plan.  But the cost of labour is high, environmental regulations are likely to be stringent, and mining is unlikely to reach the scale of vast projects in Australia and South America.



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