Lithium cools in China after end of electricity subsidies

Lithium, a key material for the manufacture of electric vehicle batteries, multiplied its price several times throughout 2022 to subsequently lose almost 30% of its value in just three months in the Chinese market, the largest in the world. world for this type of car.

Lithium carbonate reached its peak at the end of November 2022, when each ton was around 597,500 yuan (US$85,939, 81,389 euros), a figure from which it fell to 425,000 yuan (US$61,128, 57,891 euros) on February 21, according to data from the raw materials price estimation agency fastmarkets.

However, the current levels continue to contrast with those of 2021, which, according to data cited by the state newspaper Global Times, fluctuated below 100,000 yuan (US$ 14,392, 13,602 euros).

The specialized press of the Asian country pointed out in November that the rapid rise in prices was due to the nationwide shortage of lithium carbonate in a market dominated by smaller factories that offer small amounts of lithium at high prices in a time of great competition for raw materials among battery manufacturers.

In 2022, the production of lithium ion batteries lithium it was more than double (+130%) than the previous year, reaching 1.2 trillion yuan (US$ 172.749 million, 163.187 million euros), according to official data released by the Ministry of Industry and Information Technology of China.

The madness for him lithium It got to such a point that the Chinese government recently sent a team of officials to Yichun (east) before the “mining chaos” that had led many rural residents to try to extract lepidolite – a mineral used as a secondary source of lithium – in a kind of modern ‘gold rush’, causing environmental damage and even several traffic accidents due to the influx of trucks that transported the material.

Without subsidies, electric sales fall

The main reason behind the current fall in the price of lithium is the end of the subsidies that the Chinese authorities granted to the purchase of electric vehicles, which came into force in 2009 and disappeared by 2022.

After saying goodbye to these aids, electric sales in the world’s largest market for this type of car fell in January by almost half (-48%) than in the last month of 2022, partly because many buyers accelerated prices. procedures to be able to take advantage of the subsidies before they ceased to exist.

The new situation supposes athousands of yuan increase in costs” for manufacturers at a time of intense competition in the sector, according to the local press.

In fact, the China Passenger Car Association (CPCA) recently assured that potential buyers of electric vehicles are preferring to wait, not only due to the possibility of Beijing announcing new subsidies but also due to a price war in the sector started by the American Tesla.

“The macroeconomic environment is not favourable. (Chinese) citizens are very cautious when it comes to consuming, especially when it comes to something as expensive as a car”, explained a source from the lithium production sector quoted by Fastmarkets.

This uncertainty has encouraged, according to analysts quoted in the Chinese economic press, manufacturers to look for possible ways of expanding abroad, with an eye, for example, on the European market, where the ban on the sale of gasoline vehicles and diesel from 2035 could represent an opportunity for electric producers in the Asian country.

At the moment, some media say that the largest manufacturer of batteries for electric vehicles in the world, CATL, is already offering significant discounts to its main local customers.

Looking for cheaper alternatives

The high price of lithium It has also fueled research into cheaper alternatives: in late February, Chinese automaker JAC unveiled the world’s first electric vehicle powered by a sodium-ion battery.

The president of Hina, the company that developed the JAC EV battery, assured that the widespread use of sodium-ion batteries could reduce the production costs of electric ones by 10%, since they use cheaper raw materials than those of lithium, which also use nickel, manganese or cobalt.

This technology also allows faster charging and lower temperatures, but offers lower energy density, which in the JAC EV battery is about 140 watts per hour (Wh) per kilo, while in lithium-ion batteries it ranges from 240 to 350 Wh per kilo.

Despite the fact that the JAC utility is the first vehicle presented with this technology, CATL had already announced in July 2021 the creation of a sodium-ion battery with an energy density of 160 Wh per kilo.

An executive of the sector quoted by the Hong Kong newspaper South China Morning Post said that electric sales would clearly benefit from cheaper batteries, something that would support the thesis of the Swiss bank UBS, which forecast that three out of five new vehicles sold in China They will be electric by 2030.

Source: EFE