Raw materials for batteries for electric cars have become considerably cheaper

Raw materials for batteries have become significantly less expensive this year. Last year, battery metals such as lithium, nickel and cobalt became considerably more expensive and car manufacturers were also very concerned about long-term shortages. However, the market has completely turned around. The price of lithium has fallen by almost 70 percent so far this year and nickel has become about 40 percent cheaper. Cobalt has also fallen in price.

The trio of ingredients for batteries are therefore among the worst performing raw materials this year. The price drops are partly caused by slowing sales growth of electric cars and an increase in supply from China, Indonesia and the Democratic Republic of Congo. “There’s certainly enough supply of all these commodities right now,” said commodity analyst Colin Hamilton of BMO Capital Markets. A massive expansion of Chinese production capacity, aided by government support, is also ensuring that the supply of batteries exceeds demand.

The lower prices may provide some cost relief for automakers and could lead to cheaper electric cars. Prices for lithium, nickel and cobalt are also expected to remain low for the time being. According to consultancy Benchmark Mineral Intelligence, there will be an oversupply of the three metals in the coming years. The nickel and lithium markets will not show a shortage until 2027 and 2028, according to the agency, while demand for cobalt will exceed supply from 2026. However, there are also upside risks to metal prices. For example, Citigroup recently warned that there is a greater likelihood that Indonesia, which produces more than half of the world’s nickel, will take policy steps to raise prices. In addition, China plans to increase its strategic stockpiles of cobalt, which is also important in the defense and space industries.