Good News to Korean Battery Makers

Lithium prices have reached a new high.

Lithium prices have hit a new record high in contrast to the gradual downward stabilization of other mineral prices. High lithium prices may serve as another opportunity for the Korean battery industry, which mainly produces ternary and quaternary batteries with a smaller lithium content compared with batteries from Chinese makers.

The price of lithium carbonate sat at US$69,259 per ton as of Aug. 28, surpassing the record high of US$68,822 per ton in April this year, according to the Korea Mineral Resource Information Service (KOMIS) on Aug. 28. In July last year, the price stood at US$11,652 per ton, lower than the prices of other key battery minerals –- cobalt (US$50,500) and nickel (US$18,082). But since then, it showed the steepest rising curve. It is currently the most expensive mineral used in batteries.

The recent rise in the price of lithium is being driven by the US Inflation Reduction Act (IRA) and supply chain reorganization, experts say. Demand for electric vehicles is on a sharp rise and restrictions on electricity use in Sichuan Province of China, the world's center of lithium production, are also believed to have played a role. Sichuan Province which accounts for about 28 percent of the world's lithium carbonate production is going through the highest summer heat in more than 60 years. As a result, power use in Sichuan Province is restricted, putting a halt to the operation of some lithium production plants.

Such a surge in the price of lithium may offer a good opportunity to Korean battery makers, some experts say. This is because the surge can play a big role in elevating prices of lithium iron phosphate LFP (LFP) batteries which are main products of Chinese companies, compared to nickel, cobalt, manganese (NCM) batteries which Korean battery makers are focusing on.

Although LFP batteries have low energy density, they are advantageous in diffusion as they cost less than NCM batteries in production. LFP battery production cost could be lowered by using iron instead of rare metals -- cobalt or nickel. However, the surge in lithium prices is weakening LFP batteries’ price competitiveness. Lithium is included in electrolyte only in NCM batteries but in both cathode materials and electrolyte in LFP batteries, so LFP batteries have more lithium content than NCP batteries.

Prices of NCM811 batteries, a ternary battery with nickel content of more than 81 percent and LFP batteries stood at US$63 per KWh and US$50 per KWh, respectively, in November 2021, according to SNE Research, a market research institute. Although the price gap was only 26 percent as of March 2022, their prices were US$80.3 and US$70.6. The gap narrowed to 14 percent as their prices rose by 27 percent and 41 percent, respectively.

It will become more notable if the subject is limited to cathode material that determines types of batteries. In the case of NCM811 batteries, the cost of cathode materials increased from US$33 to US$42.9 during the same period, while the cost of LFP from US$22 to US$38.5. The difference in prices of cathode materials between the two batteries has narrowed significantly to 11 percent. This is because lithium prices impacted their final prices.

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