A SURGE in demand for electric vehicles (EVs) is sending the price of raw materials soaring, threatening to slow the push toward making cheaper batteries that are key to more widespread adoption.

Lithium, the mainstay for rechargeable power packs used in EVs, is roaring back after a three-year slump in prices, while cobalt surged about 57 percent last quarter. Nickel jumped to a more-than six-year high earlier this year on optimism about the clean energy transition, though fell in March on plans by a top Chinese producer to beef up its battery business.

China is the biggest player in EV batteries, with the majority of the world’s capacity, and has a stranglehold over the processing of crucial battery materials. With demand building, producers are striving to make cheaper batteries — the most expensive components of EVs, accounting for about 30 percent of the total cost.

“If lithium and other high-cost inputs, such as cobalt and nickel, enter periods of sustained higher pricing, this would eventually take its toll on the ability of battery producers to keep lowering costs,” according to Cameron Perks, a senior analyst at Benchmark Mineral Intelligence.

The average price of a lithium-ion battery pack dropped to US$137/kWh in 2020, according to a BloombergNEF survey last year. A decade ago, they were sold for over US$1,000. EVs are expected to start reaching price parity with internal combustion cars when the price touches US$100/kWh.

“If raw material prices were to rise to 2018 levels, we expect it would only delay the point at which battery pack prices reach below US$100/kWh by around two years, meaning it will be delayed from 2024 to 2026,” according to James Frith, an analyst at BloombergNEF.

The urgency is being felt out in the market. Gotion High-Tech Co., China’s fifth-biggest battery producer, said it has been seeking to secure upstream lithium supply to stabilize raw material costs and was also improving production processes and technology to counter the impact of higher input costs.

(SD-Agencies)