Quantitative Analysis /
United States of America

Soaring lithium prices could cripple sustainability plans

  • Prices have increased 442% over the past year and we forecast a further 40% to come

  • Half of all new vehicles are set to be electric by 2030, but Elon Musk fears lithium supply could hamper progress

  • Battery manufactures such as Samsung, Tesla, and LG should outperform

Soaring lithium prices could cripple sustainability plans
James Huckle
James Huckle

Quantitative Analyst

Tellimer Research
14 April 2022
Published byTellimer Research

Source: Investing.com, Tellimer Research

Lithium is becoming very expensive

The price of lithium carbonate currently sits at 482,500 yuan/tonne and is forecast to steadily rise to 675,000 yuan/tonne over the next 12-months – an increase of 40% – according to our machine learning model.

Production in China has increased 42% in the past year due to higher yields from salt lakes and improved capacity for miners. But despite this, demand has outstripped supply, and Lithium prices have surged 442%.

Electric vehicle demand increases

Rising energy prices have catalysed the transition away from fossil fuels, adding to the booming demand for electric vehicles – which are powered by lithium batteries – such as the popular Tesla models. Currently, electric vehicles make up 9.3% of global vehicle sales and estimates put that figure at 50% by 2030, a CAGR of 22%.

Half of all new vehicles will be electric by 2030

Elon eyes up lithium supply

Elon Musk recently tweeted:

“Price of lithium has gone to insane levels! Tesla might actually have to get into the mining & refining directly at scale, unless costs improve. There is no shortage of the element itself, as lithium is almost everywhere on Earth, but pace of extraction/refinement is slow.”

This came a day after he opened his ‘Giga Texas’ factory, now the largest factory by size in the US, which will be focusing on producing Tesla’s revolutionary 4680 battery pack along with the lithium-intensive Lithium Iron Phosphate (LiFePO) batteries which are used for much of their “Standard Range” vehicles shipped outside of America.

Bullish outlook for battery technology companies

The technology companies that manufacture the latest electric batteries, including Samsung, Tesla, and LG, should outperform over the next 12 months.

The Global X Lithium & Battery Tech ETF (LIT) provides exposure to this trend.