Carmakers and analysts warn that rising prices for lithium, cobalt, nickel, and rare earths could delay the point at which electric vehicles compete with internal combustion engines (ICE) on cost.

The average cost to produce a lithium-ion battery cell fell from $US290/kWh in 2014 to $US110/kWh in 2020, according to Benchmark Mineral Intelligence.

In December last year, lithium-ion battery pack prices — about 21 per cent of the total cost of an electric vehicle — were reported below $US100/kWh for the first time.

BNEF’s 2020 Battery Price Survey predicted that by 2023 average pack prices will be $101/kWh.

This is a very important number.

“It is at around this price point that automakers should be able to produce and sell mass market EVs at the same price (and with the same margin) as comparable internal combustion vehicles in some markets,” BNEF says.


Rising battery metals prices could delay the $US100/kWh party

The low-price environment for many battery raw materials – lithium, cobalt, graphite, nickel — is changing.

In January, Benchmark’s lithium price index surged +15.6 per cent and cobalt reached two-year highs as automakers and cell manufacturers react to the strong upward trend in EV sales.

While these prices are far below the record highs reached in 2017-2018, the trajectory is clear, and carmakers are worried.

Nissan admitted, in a recent interview with Argus, that it is very sensitive to the price of raw materials.

“Lithium and class 1 nickel are all projected to be in tight balance in 2021 and prices for a number of metals bottomed out during 2020 and may rally further this year,” says Zoltan Venczel, global head of EV energy at Nissan.

“On an industry level, rapid price hikes in lithium and cobalt are a threat to the cost-efficiency of EVs versus ICE vehicles.

“If lithium prices were to return to the peaks of 2018, our 2030 battery price-cost projection would increase by around 20pc to $70/kWh, which would delay the crucial $100/kWh ICE cost parity timeline by roughly two years.”

There is little argument that demand for critical raw materials and chemicals will continue to increase. The lithium industry needs to double in size every 4-5 years, as do other battery raw materials.

And yet the mine finance side of the market “has been more akin to the slow-moving train wreck for which 2020 will be mostly remembered”, Benchmark’s Andrew Leyland says.

“In short, we are financing demand for commodities and chemicals, but not their supply,” he says.

“[Record] raw material price levels have happened before, and the market fundamentals show they could happen again.”