Amid Plummeting Raw Material Prices, Lithium Alone Surges... The Unending 'Supply Chain Crisis'

Up a staggering 468% from a year ago... 3% drop from the peak
Rising demand for LFP batteries complicates processing and mining permits

[Asia Economy Reporter Jeong Dong-hoon] The prices of raw materials, which had soared due to the COVID-19 pandemic and global supply chain disruptions, are plummeting day by day. Raw material prices, which serve as leading indicators of the economy amid fears of a global recession, have clearly entered a downward trend. On the other hand, the price of lithium, an essential raw material for electric vehicle batteries, continues to surge alone. Despite the sharp collapse in prices of other minerals, lithium prices have risen more than fivefold over the past year, showing a robust trend. The soaring lithium prices are interpreted as evidence that supply chain crises will continue despite global recession concerns.

◆ Battery symbol ‘Lithium’ still holding high ground = According to the Korea Resource Information Service and the industry on the 8th, the price of lithium (based on 99% lithium carbonate), which was 80 yuan (about 15,500 KRW) per kilogram in July last year, has surged 468% to 455 yuan (about 88,200 KRW) currently. This is only a 3% drop compared to the all-time high of 471 yuan (about 91,300 KRW) recorded in April.

Meanwhile, other battery materials such as nickel and cobalt, which surged after the Russia-Ukraine war, are sharply falling. For the most expensive cobalt, the price dropped about 38% from $81,600 per ton (about 107.3 million KRW) until April to $50,000 (about 64.8 million KRW) currently. Nickel also fell 32% during the same period, from $32,800 (about 42.5 million KRW) to $22,000 (about 28.5 million KRW).

The reason lithium prices are rising is believed to be due to its extensive industrial use in the battery sector. Lithium is a key material that generates and stores electricity in batteries. When charging starts, lithium ions and electrons move from the cathode to the anode. After charging (cathode → anode) is complete, the discharging process (anode → cathode) proceeds, providing electrical output to devices equipped with batteries.

Lithium is used in both NCM (Nickel-Cobalt-Manganese) batteries, referred to as ternary batteries, and LFP (Lithium Iron Phosphate) batteries. The domestic industry mainly produces ternary batteries, while China leads in LFP batteries. Recently, demand for the relatively cheaper LFP batteries has spread across the industry, driving the high price trend of lithium. In fact, sales of electric vehicles equipped with LFP batteries in China are surging, and global automakers such as Tesla are also eager to adopt LFP batteries. Goldman Sachs estimates that LFP batteries will increase their market share from the current 30% to nearly 40% of the battery market by 2030.

Although lithium reserves are abundant, processing lithium for battery use requires considerable time and cost. Due to growing environmental concerns, obtaining mining permits involves complex procedures, making short-term production expansion difficult. Therefore, the prevailing view is that lithium prices are unlikely to fall anytime soon.

◆ Amid raw material price plunge, oil price at ‘$100’ mark = Meanwhile, international raw material prices, which had been breaking records daily, are rapidly declining. Prices of steel and non-ferrous metal raw materials such as iron ore, copper, and aluminum, which form the foundation of industrial production, have fallen more than 30% over the past three months. This is the first time in over two years since the COVID-19 pandemic that the upward trend in major raw material prices has been broken.

Copper, a representative industrial base material and a barometer of the international economy, barely surpassed $7,500 (about 9.71 million KRW) per ton. This is more than a 20% drop compared to the beginning of this year. Compared to the all-time high of over $10,600 (about 13.73 million KRW) per ton recorded in April, the decline rate reaches 30%. According to the Korea Resource Information Service, aluminum prices fell more than 30% in the past three months to $2,417 as of the 7th. The spot price of iron ore, which surpassed $200 for the first time in mid-last year, has also dropped to the $110 range.

The Standard & Poor’s (S&P) GSCI grain price index, which hit an all-time high in mid-May, has also fallen 28% currently. The metal price index tracking six industrial metals traded on the London Metal Exchange (LME) has dropped more than 30% since peaking in March.

On the other hand, international oil prices remain high. On the 7th (local time), West Texas Intermediate (WTI) crude oil for August delivery on the New York Mercantile Exchange (NYMEX) closed at $102.73 per barrel (about 133,168 KRW), up 4.3% ($4.20) from the previous day. This is two days after it plunged 8.2% below $100 amid recession fears on the 5th, regaining the $100 mark. Concerns that global oil supply may decrease lifted international oil prices, which had been falling sharply for two days due to recession fears.

The Russian Novorossiysk court ordered the Caspian Pipeline Consortium (CPC) to suspend operation of the pipeline connecting western Kazakhstan and the Black Sea for a month, and the U.S. strengthened sanctions against Iran, fueling these concerns. Jeffrey Halley, senior analyst at OANDA, forecasted, "Oil prices will remain above $100 for the time being as Russian oil supply is expected to decrease and OPEC countries are not investing in maintaining oil production capacity."

This content was produced with the assistance of AI translation services.