The commodity boom begins to drive up battery prices

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(Bloomberg) – The world’s largest battery market shows the pressure of soaring commodity prices.

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Chinese manufacturer Gotion High-tech Co. sent a letter to customers in mid-October seeking to adjust battery prices, citing an increase in the cost of cathode materials and electrolyte compared to foils. copper and aluminum. The company said it “had done its best to reduce the cost impacts, but to little effect.”

Gotion’s decision highlights a key obstacle the world faces in its transition to cleaner, greener sources of energy. Sales of electric vehicles have skyrocketed as companies have been able to manufacture batteries at ever lower prices. But historic rallies on a multitude of commodities threaten to reverse that trend and risk slowing the shift away from fossil fuels if the cost of everything from plug-in cars to wind turbines continues to rise.

“Several materials markets are going to face structural challenges as they attempt to increase supply to meet growing demand for batteries,” said Andrew Miller, COO at Benchmark Mineral Intelligence. “As a result, periods of higher and sustained prices will strain efforts to reduce the price of battery cells. “

Electric cars are expected to start costing the same as gasoline-powered vehicles once batteries hit $ 100 per kilowatt hour, with BloombergNEF estimating they fell to around $ 137 / kWh last year. But rising prices in China reinforce expectations that the year-over-year downtrend seen over the past decade may stop. About 40% of the cost of a battery is related to raw materials which have recovered, analyst James Frith said in September.

Still, Gotion – the largest battery maker in China behind industry giants Contemporary Amperex Technology Co. and BYD Co. – said in a written response to Bloomberg News that its “customers have understood our need to implement rising battery prices as our cost pressure. on raw materials is accelerating.

For strategic customers, the company said it is focused on building stable working relationships through long-term contracts, with potentially lower price increases than general customers and longer negotiations.

BYD will increase the prices of its batteries by at least 20% from this month due to cost inflation, Caixin reported last week, citing a letter from the company to its customers. A company spokesperson declined to comment. A representative for CATL declined to comment immediately.

Raw materials represent a larger share of the overall cost of a battery cell after manufacturers are able to ramp up production and improve manufacturing and technology, BMI’s Miller said. Chinese lithium carbonate prices have more than tripled this year, while cobalt has climbed and copper and nickel remain near all-time highs.

It’s not just car buyers who can feel the pinch. Wind turbine maker Vestas Wind Systems A / S said this week it was slashing its profit outlook for the year amid rising costs and supply chain grunts, while inflation in commodities also fueled concerns about the outlook for economic growth.

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