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Commodities

Lithium prices surge as China pushes e-vehicles

Sharp price rises for the key battery material could make cars more costly

Heavy rains in South America dampened lithium production, resulting in higher prices.

TOKYO -- Propelled by demand for batteries used in electric vehicles, spot prices of lithium have climbed more than 30% since the start of the year and will likely drive up the cost of the autos.

The Chinese spot price of lithium carbonate, the bellwether for lithium trades, came to around 152,000 yuan (around $23,000) a ton in mid-October -- up from 110,000 yuan at the beginning of the year and 18% higher than in late August.

The rare metal is used as cathode material in lithium-ion rechargeable batteries. The increase in prices owes to growing consumption in China, which accounts for 40% of global demand. To combat air pollution, the Chinese government is working to strengthen environmental regulations and popularize electric vehicles. Recently relaxed eco-car regulations make such autos easier to manufacture and sell.

Chinese sales of electric vehicles are projected to rise 20% from last year to around 290,000 units in 2017, according to market research company Fuji Keizai. The nation's lithium carbonate demand is thus seen climbing 30-50% to between 80,000 tons and 90,000 tons.

Reduced supply is also driving prices higher. In South America, a leading production region, the metal is produced by sun-drying saltwater containing lithium. But heavy rains in Chile and Argentina this May and June slowed evaporation, cutting yields.

Most cathode materials producers import lithium under six-month to one-year contracts. With lithium demand widely expected to continue climbing, some are already preparing for 10% price hikes next year.

Cobalt, another metal used in lithium-ion batteries, has doubled in price on growing demand and now goes for roughly $30 a pound. Brisk demand could drive the price to $50, some suggest.

Lithium and cobalt are thought to constitute 10-20% of battery production costs. Some battery producers say continued high prices could force them to raise battery prices, which in turn would make electric vehicles more expensive to build.

(Nikkei)

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