The cost of extracting vital battery material is likely to create a ‘supercycle’ and drive up prices
A year ago, Tesla Motors founder and chief executive Elon Musk quipped that lithium was only the “salt on the salad” for the batteries that are vital to the US company’s electric cars.
Fast forward 12 months and concern is growing among analysts, and some other carmakers, that the supply of what Mr Musk dismissed as mere “salt” will not be able to keep pace with demand as the expansion of electric vehicles begins to erode the world’s century-long reliance on oil.
“There’s a pivot,” says John Kanellitsas, vice-chairman of Lithium Americas, a miner that is developing a lithium project in Argentina. “There’s much more consensus on demand; we’re no longer even debating demand. We’re shifting to supply and whether, as an industry, we can deliver.”
Prices for lithium carbonate, used in the cathode of a battery, have more than doubled since 2015, according to consultancy CRU. Asset managers, including BlackRock and Capital Group, have recently bought up shares in smaller lithium producers, while there is speculation that battery and carmakers could also begin to invest in miners to secure a tighter grip on supply.
Some now point to the possibility of a “lithium supercycle”, echoing what unfolded in the iron ore market at the turn of the 21st century, when Chinese demand drove prices higher.
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