The US Government may soon suffer from intensified battery metal shortage for electric vehicles due to the major price drop of lithium, nickel cobalt, etc., The Wall Street Journal reported.
The plunge in critical battery mineral prices may continuously prompt mining companies from postponing their announced projects that are supposedly Biden’s key in establishing a domestic and reliable supply chain.
Plunge in EV battery materials prices
Prices of battery-grade lithium have dropped over 60% so far this year, Benchmark Mineral Intelligence reported. Meanwhile, nickel, graphite, and cobalt prices declined by approximately 30%.
These price plunges are unsurprising, considering China’s slower-than-anticipated recovery from COVID-19 lockdowns. Moreover, waning demand for EVs also contributed to the sudden drop in battery metal prices.
According to Mining, the price decline is specifically more serious in China. Lithium is apparently trading at a huge discount than in the US.
“This situation is a bit dangerous because the mines aren’t going to get built. We should be building those mines now and we’re not.”
Nickel 28 CEO Anthony Milewski
Delayed mining projects
Notably, mines usually take years from metal discovery to reaching production. Despite knowing this, numerous mining companies decided to delay and suspend their previously announced mine-related project development and expansion.
Apart from the plunging prices in critical minerals, mining firms have also struggled with environmental concerns, local opposition, red tape, waning demand, and other issues.
World’s leading lithium firm Albemarle warned that battery mineral supplies will fall short compared to demand toward 2030. It explained that mining firms lack the incentives to launch the planned projects. According to AFR, the company withdrew its $6.6 billion bid for Liontown Resources in October.
Moreover, Philadelphia-based lithium firm Livent announced plans to postpone its Argentine project expansion due to declining prices worldwide. It also caused the company to report low quarterly earnings.
“We continue to see production-expansion delays globally.”
Livent Chief Executive Paul Graves
AFR also reported Rio Tinto’s warning that the three-year lithium price boom may end due to the price declines.
American automaker Ford also scaled down its battery factory development in Michigan due to waning EV demand and increasing labor costs. The plant’s annual production capacity is now expected at 20 gigawatt-hours, down from the original 35 gigawatt-hours of EV batteries. It indicates a 42.8% cut, the NY Times noted.
Potential impacts
The White House has set a target of having electric vehicles account for at least 50% of the US new vehicle sales by 2030. In order to achieve that, it continuously launched major programs and incentives to promote the shift to electric vehicles and establish a domestic supply chain.
However, the disruption brought on by the battery metals price drop implies that the US will face major challenges before hitting its ambitious targets.
The sudden disruption may trigger battery mineral shortages in the future. Benchmark’s calculations suggest that the lithium supply-demand remains balanced for now. However, demand will likely surge to more than threefold to 3.1 million metric tons by the end of the decade. In contrast, the supply will only have almost 400,000 tons. Likewise, nickel and cobalt are also projected to face supply shortages by 2030.
In response, the White House continues to work on potential solutions to alleviate pressures. As EV-a2z recently reported, it opened a $3.5 billion funding under the 2021 infrastructure law to accelerate battery and minerals production in the country. It effectively urged some companies to pursue their battery-related projects despite the disruptions.
Lithium Americas is reportedly negotiating a low-rate loan from the Department of Energy. Exxon Mobil also commenced drilling for lithium in Arkansas last week, aiming to kick off battery-grade lithium production as early as 2027.
The projected shortage in battery minerals due to their declining prices will undoubtedly pose a major challenge in the widespread adoption of EVs. If we look at it differently, declining battery mineral prices can also make EVs more affordable and encourage customers to buy. However, it would be problematic if there would not be sufficient supply to meet the demand.
