| S&P Global Market Intelligence - India - November 12, 2021 An aerial view of a coal-fired power plant on Oct. 13, 2021, in Hanchuan, China. China's energy shortage is curbing lithium and battery production, adding to inflationary pressures and supply tightness throughout the supply chain…China sits at the center of the battery supply chain, refining the majority of the world's lithium, cobalt and rare earth elements, while also producing the bulk of the battery anodes, cathodes and electrolytes needed for electric vehicles. However, in a rush to preserve dwindling coal supplies and to ease heightened pollution levels, China has asked several industries to hit the brakes and lower their electricity use. The disruption is hitting battery suppliers and lithium suppliers, and it could drive up prices amid already tight supply conditions…Raw materials represent the bulk of the total cost of a battery. The cost of certain lithium-ion batteries declined by nearly two-thirds between 2014 and 2020, from $290/kWh to $110/kWh, according to Benchmark Mineral Intelligence data. But that trend could reverse in the coming months, as prices for lithium and other battery materials have surged recently…In addition, Benchmark Mineral Intelligence's battery cathode price index, which tracks the prices of materials used in cathodes, has increased 62.4% in 2021, as of Oct. 27…Widespread power cuts in China have hit battery markets before, but never when the battery market was so hot. Global passenger plug-in EV sales in 2021 are forecast to more than double last year's sales, reaching an estimated 6.9 million units, according to Market Intelligence research…In a letter to clients, major Chinese battery-producer BYD Co. Ltd. announced plans to increase its cell prices by 20% starting in November, citing rising raw material costs, according to reporting by Chinese media company Caixin…Chinese production of anodes and cathodes, two of the main components in rechargeable batteries, showed signs of slowing late in the third quarter for some suppliers, potentially due to the energy shortage and the semiconductor chip shortage…"This is a supply chain that's going to struggle to keep up with itself," Benchmark Mineral Intelligence's Leyland said. "That's already leading to higher prices and inflation in the supply chain, not just in raw materials such as lithium, cobalt and nickel, but in all of the other components in a battery: in shipping costs, labor costs and equipment costs. We're seeing cost inflation of 20%, 30%, 40% for some pieces of equipment and that's all going to flow through eventually into higher prices." |