What To Know About The Lithium-Ion Battery Supply Shortage

As global electric vehicle production ramps up, experts are anticipating the next major auto market supply shortage could be lithium-ion batteries.

Spodumene Squeeze: On Tuesday, Bank of America analyst Jack Gabb said there is an ongoing supply squeeze in spodumene. Spodumene is a mineral that has extremely high lithium content and is the most widely used mineral source of lithium.

Gabb reported that spodumene prices are now at $800 per ton, up 14% since late May, and have now doubled during the current supply squeeze.

Related Link: EXCLUSIVE: EVgo CEO Cathy Zoi Talks Charging Station Growth Drivers, Major Auto Industry Partnerships

Looking ahead, Gabb said spodumene prices could ultimately hit $1,000/t by the end of 2021 given the current market deficit.

“In short, the spodumene market remains strong with supply constrained and downstream hydroxide margins elevated given hydroxide prices have risen from US$14.5k/t at the beginning of June to US$16.2k/t currently,” Gabb said.

The good news is that Bank of America is forecasting an additional 1 million tons per year (Mtpa) of spodumene will come online in 2022 and more than 2 Mtpa could be added in 2023, a phenomenon that should ease pricing in the longer term.

Lithium Stocks Surging: In the meantime, shares of leading lithium producers may continue to outperform. Here’s a look at the performance of some of the largest global lithium producers in the past year:

• Albemarle Corporation ALB is up 123.8%.
• Ganfeng Lithium Co Ltd GNENF is up 241.9%.
• Sociedad Quimica y Minera de Chile SQM is up 82.4%.

Even with a large potential uptick in lithium mining in the next couple of years, lithium supply concerns may not be going away. BloombergNEF clean energy analyst Logan Goldie-Scot recently said lithium-ion battery demand will increase by at least tenfold over the next 10 years.

A recent study by Norwegian independent energy research group Rystad Energy found investment in lithium mining will need to accelerate significantly to avoid hitting a “serious lithium supply deficit” by 2027.

That supply deficit could potentially delay the production of an estimated 3.3 million EVs per year in 2027 and 20 million EVs in 2030 if the world doesn’t make a serious effort to increase lithium mining today.

Benzinga’s Take: Rising lithium prices are the last thing EV investors need as the industry fights to bring electric vehicle costs down to a level at which they can be competitive with internal combustion vehicles.

Earlier this month, Bank of America estimated EVs are on track to reach price parity with ICE vehicles sometime in the mid-2020s.

(Photo: Albemarle Coropration video still)