Lithium, the key element in the batteries that power electric cars, as well as smartphones, tablets, and laptop computers, is sometimes called white gold. Over time, the price of the metal has gone up and up. But recently, and surprisingly, the price of lithium has actually gone down, helping to make electric vehicles more affordable.
Over the first couple of months of this year, the price of lithium has dropped by nearly 20%. The price of cobalt, another important component of vehicle batteries, has fallen by more than half. Even copper, another battery material, has seen its price drop by 18%.
Many analysts predicted that prices of these commodities would stay high or even climb higher. The reason for the decline, as well as whether it is likely to persist, is the subject of much debate.
Some experts believe that the price drops are a result of demand not being as high as expected, perhaps related to slowing sales growth of EVs in Europe and China after certain subsidies expired. Other industry experts said that the drop was a result of new mines and processing plants providing additional supply sooner than was thought possible.
Despite the price drops, mining and processing lithium remains an extraordinarily profitable business. It costs from $5,000 to $8,000 to produce a ton of lithium that sells for ten times that amount. With such fat profit margins, there is no shortage of banks and investors eager to finance lithium mining and processing projects. Such profit margins are probably not sustainable and that will likely result in more reasonable prices over time.
There is plenty of lithium in the world. The huge demand for it is a recent phenomenon and the world is still working out how to meet that demand.
Falling Lithium Prices Are Making Electric Cars More Affordable
Photo, posted January 9, 2023, courtesy of Phillip Pessar via Flickr.
Earth Wise is a production of WAMC Northeast Public Radio