Electric cars could get cheaper as a crucial component in them drops in price
By Sourced Externally
June 8, 2022
The cost of electric cars could start to fall as the price of a core component in EV batteries is expected to reduce, according to market analysts Credit Suisse.
Lithium is a key component in the batteries that go into electric cars and home energy storage
Lithium prices have been hitting record highs as demand outstrips supply
But now supply is ramping up and this could lead to lower prices for battery manufacturers
Lithium is not only used in EV batteries but also in home solar storage and big batteries.
The market price of the mineral’s raw ore has soared to about $US6,000 ($8,300) a tonne as the shift to renewable energy accelerates at a time when supply is still trying to catch up.
“Prices have gone through the roof,” Credit Suisse head of energy resources research Saul Kavonic told ABC News.
“The scarcity we’re seeing in lithium right now is fundamentally not a good thing.
But now many more lithium mines are being built, including in Australia.
“We’ve seen a lot of new mines being brought into production, incentivised by the high prices,” Mr Karovic said.
And the cumulative effect of all those mines chasing after a boom may just see them get much less for the hard white mineral they dig up.
Credit Suisse is among several firms that have just revised down their price forecasts for lithium as more supply hits the market, and as demand for batteries doesn’t take off as quickly as predicted as key markets like China grapple with a looming economic downturn.
By the end of next year, Credit Suisse now predicts the spot price to dive by half to $US2,500 ($3,470) a tonne.
“We actually might see the market return to balance or even a surplus over the next 18 months,” Mr Karovic said.
What does this pose for lithium mine viability?
Credit Suisse is not the only market analyst forecasting a drop in lithium prices.
Last week, lithium miner stocks on the ASX dived as a range of major firms including Bell Potter and Goldman Sachs put out revised forecasts on pricing.
Goldman Sachs is forecasting a “sharp correction” in lithium prices, according to media reports.
Macquarie Group’s forecast is less bullish, with its analysts believing that prices will stay higher for longer due to demand for electric cars still rising. However, it also believes prices for lithium in China have hit a peak.
Declining prices have big ramifications for Australia’s economy, and taxes from mining revenue.
We are already the world’s biggest exporter of lithium and production is expected to triple within four years, according to federal government forecasts from March.
Core Lithium is one of the new mines here under construction.
The ASX-listed company made the call to go ahead with the mine near Darwin at the end of last year, when lithium prices were starting to really take off.
Chief financial officer Simon Iacopetta believes the price drop forecasts by Credit Suisse and Goldman Sachs are overstated.
“We expect the shortfall of supply or new products coming to market to result in a continued strengthening of [prices] for the near term,” Mr Iacopetta said.
However, Mr Iacopetta told ABC News that the mining project’s feasibility was based on a long-term forecast of prices coming down to as low as $1,000 for the spodumene concentrate lithium ore that it sells to market.
“We should be selling into a fairly positive price environment and generating healthy margins,” he said.