Lithium surges in price as cars go electric

Lithium prices have tripled in the course of a year amid ballooning global demand for eco-car batteries, which is compounding a supply shortage that could last for another few years.

China is the world’s largest consumer of the rare metal, accounting for about 40% of global demand. As such, its market has become an international benchmark for prices. A ton of lithium went for around 129,000 yuan ($19,300) on the Chinese spot market in mid-July, slightly less than in early spring but still around three times the year-earlier price.

China has promoted the use of electric cars and plug-in hybrids as a way to alleviate severe air pollution. The government offers subsidies for green-car purchases, and buses increasingly run on lithium-ion batteries.

Chinese buyers are offering premium prices to get enough of the soft, silvery metal. “A Chinese battery maker we’d never dealt with before asked us to sell them lithium,” a major Japanese producer of lithium products said.

Tesla Motors is another factor. Orders have poured in for the Model 3, an electric sedan set to roll out next year. The American automaker and Japanese partner Panasonic aim to finish a battery factory in the U.S. ahead of schedule and begin volume production within the year.

Lithium supply has not kept pace with demand. The “big three” producers — Chile’s SQM and American competitors FMC and Albemarle –dominate the market, with some Chinese companies in the mix. Though new production capacity is in the works in such locations as North America and Australia, many analysts see demand outstripping supply until 2019 or 2020.

Global lithium demand totaled 170,000 tons of lithium carbonate equivalent last year, 60,000 tons of which went into battery production. Demand is seen reaching 280,000 tons in 2020, with 165,000 tons bound for batteries.

Since lithium accounts for 10% or less of the total cost of batteries, it has little impact on the price of the final product, according to Japan Oil, Gas and Metals National Corp., or Jogmec. Japanese prices of lithium have moved higher as well, but domestic makers of electrode materials for lithium-ion batteries have not yet fully passed on the increase to their customers.

Japanese electronics retailers have seen brisk sales of portable battery chargers for smartphones since the release of the hit game “Pokemon Go.” Keeping the app open adds to the drain on battery life.

Each charger is thought to contain just 3 grams or so of lithium carbonate equivalent, compared with around 20kg for a 25 kilowatt-hour electric-car battery.

“Unless there’s a considerable volume of charger sales, lithium demand isn’t going to get a boost” from the Pokemon phenomenon, said a major lithium products supplier.

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