As the world goes electric, so goes the demand for energy storage with lithium-ion batteries and storage cells. And as that demand grows, so does demand for a hot commodity that keeps getting hotter: lithium.

Where the supply curve meets the demand curve

The spot price of lithium is rising steeply as the demand for electric vehicles of all types grows, along with a rise in sustainable energy initiatives and efforts.

According to a May 2022 Bloomberg article, citing Benchmark Mineral Intelligence, “Global investment in EVs has grown faster than any other new-energy sector over the past few years, outstripping even wind and solar power. Current lithium spot prices could add up to $1,000 to the cost of a new vehicle.”

It’s a classic case of supply and demand economics intersecting. Where the two intersect determines price. In the case of lithium, its demand is high, and its supply is limited and appears to be tightening. The price has risen. And demand continues to expand. According to Bloomberg’s projections, the world is going to need five times more lithium by end of the decade.

What’s causing the changing dynamic in supply and demand for lithium?

Our shift toward sustainable energy is starting to show.

The electric car is attempting to go mainstream. In a May 2022 article, Time magazine laid out the impending price spike by tagging it directly to a booming EV market, which, they said “is putting demand pressure on battery producers, which in turn puts demand pressure on the minerals suppliers. While the Earth has plenty of lithium to go around, the supply needs to be extracted from brine pools and underground reserves, and current mining operations aren’t sufficient to keep up with the auto industry’s growing needs.”

As it does, we can expect more reliance on the dense storage capabilities of lithium-ion cells and the merits they provide to the EV market. EVs—whether they are a consumer’s car, or a logistics vehicle such as a truck—are improving in design and range, and many are working on creating an ecosystem and charging infrastructure to support them. As this progresses, the spot price of lithium is skyrocketing.

According to the Time magazine reporting, this spike in prices is significant. With such a rise in the raw material used to capture lithium, anything that uses lithium, now and even more into the future, could feel the pain of rising costs.

“The price for lithium carbonate—the compound that gets extracted from the ground—has shot up 432% year over year, hitting nearly $62,000 per metric ton in April. In the six years prior, for comparison, it averaged around $11,000,” according to the article.

As the spot price increases and the supply-demand equation swells, electrical contractors would be wise to keep a watchful eye on lithium prices. This is all at a time where prices are rising in so many categories, and the industrial sectors are experiencing unprecedented surge in the prices of many commodities and finished goods.