Benchmark Mineral Intelligence: EV Battery Metal Prices in Flux

The electric vehicle (EV) revolution is driving demand for critical minerals, with lithium, cobalt, and nickel prices fluctuating significantly in recent years. According to S&P Global Market Intelligence data, the price of battery-grade lithium carbonate ended 2023 at $13,575 per metric ton, ex-works China, dropping 80.9% from its 2023 high and 81.4% from its 2022 high. The London Metal Exchange cash price for nickel was $16,375/t at the end of 2023, decreasing 47.1% from its 2023 high and 66.1% from the 2022 high.

The primary factors driving these changes include a slowing Chinese economy, accelerated production in the mining industry, and a drop in EV demand that was lower than expected despite still growing. Additionally, the end of China's 11-year EV subsidy program and a more uncertain global macroeconomic outlook contributed to the price declines.

The recent slowdown in the Chinese economy and increased mining production have led to a surplus in certain essential metals, resulting in a decline in raw materials pricing. This trend has been observed in the prices of lithium and nickel, which are key components in electric vehicle (EV) batteries. According to S&P Global Commodity Insights, the average price for an EV in the US fell to $50,798 in December 2023, decreasing 24.2% from the price peak in the second quarter of 2022. This decrease is attributed to a drop in raw material and component prices due to overcapacity across the battery value chain and lower EV demand than expected, despite still growing (Stoikou, 2023).

The cost of battery cells decreased about 30% in 2023 compared to a year earlier, as metals used in the cathode, the most expensive part of the lithium-ion battery, recorded significant price declines. Lithium and nickel are the highest-cost metals used in EV batteries, and their prices have cooled at the end of 2022 when China ended an 11-year EV subsidy program and the global macroeconomic outlook grew more uncertain (S&P Global Market Intelligence, 2023).



This trend is expected to continue in the near future, as the slowing Chinese economy and accelerated production in the mining industry are likely to maintain the surpluses in essential metals and keep raw materials pricing relatively low. However, it is essential to monitor the situation, as changes in demand, supply, and macroeconomic factors can influence the prices of these critical metals.

The rapid growth of electric vehicles (EVs) in China challenges raw material demand, particularly for lithium, cobalt, and nickel. A study by Benchmark Mineral Intelligence found that replacing nickel-cobalt-manganese (NMC) batteries with lithium iron phosphate (LFP) batteries and implementing battery recycling can reduce lithium, cobalt, and nickel demand between 2021 and 2060 by up to 7.8 million tons (Mt) (67%), 12.4 Mt (96%), and 37.2 Mt (93%) respectively. This would significantly decrease reliance on imports and reduce carbon emissions by up to 6,532-6,864 Mt (36.0-37.9%), depending on the recycling method employed.

However, this reuse strategy may delay battery recycling and risk lithium supply shortages, necessitating trade-offs between carbon reduction and material supply. Future technologies, such as lithium-sulfur and all-solid-state batteries, despite their energy efficiency, might exacerbate lithium shortage, underscoring the crucial need for increased lithium supply.

In the short term, the greatest obstacles to continued strong EV sales are soaring prices for some critical minerals essential for battery manufacturing, as well as supply chain disruptions caused by Russia's attack on Ukraine and by continued Covid-19 lockdowns in some parts of China. In the longer term, greater efforts are needed to roll out enough charging infrastructure to service the expected growth in electric car sales.