energy insights

World Lithium Instability Encroaching on U.S. EV Industry

Shifting winds in the international lithium industry could soon batter the U.S. electric vehicle (EV) market with faltering supplies and rising battery prices, leaving U.S. car makers with few domestic resources to shelter against the storm.

“Soaring commodity prices and supply chain bottlenecks are threatening to push up the cost of batteries seen as crucial in the fight” to reduce carbon emissions, according to a report from Bloomberg.

As raw material costs increase, the markets could see the average price of a lithium-ion battery jump to $135 per kilowatt hour, a 2.3% gain from the 2021 cost, the report said. This would mark the first price increase since 2010. Under 2022 pricing, the cost of a 100-kilowatt-hour battery would be $13,500, a sizeable cost for an electric vehicle.

“The lithium market is extremely tight at present, so spot prices are very sensitive to any supply disruptions,” said Alice Yu, analyst at S&P Global Market Intelligence.

There is constant pressure on lithium producers who are already struggling to keep up with exploding world demand from EV battery makers. As a result, prices spiked almost 500% in 2021, according Benchmark Mineral Intelligence.

Of course, the situation originates at dealership showrooms around the world, where thousands of new EVs are rolling off lots every day. According to Platts Analytics, global EV sales are expected to reach 6.5 million vehicles in 2022 and 10.5 million vehicles in 2025. This is compared to an estimated 6 million in 2021 and 3.1 million in 2020.

But industry watchers warn that surging lithium prices could throw a wet blanket on the hot EV market as consumers reassess costs. And U.S. manufacturers, who have been counting on a continuing decline in battery prices, have little access to more reliable domestic supplies.

While countries like Chili, Australia, Argentina and China are already major players in the lithium industry, the U.S. is largely on the sidelines. The nation’s only large-scale lithium production facility is in Silver Peak, Nevada, which produces less than 2% of the world’s annual lithium supply.

New mining operations have been proposed, but they remain under regulatory scrutiny, and many have encountered resistance from local communities and environmental groups. Without a robust domestic supply, U.S. electric vehicle manufacturers and consumers will remain adrift amid the shifting winds of a stormy international lithium market.