Lithium-ion batteries power much of the modern world. Since their commercial introduction in 1991, improvements in rechargeable lithium battery technology have generally caused battery prices to fall consistently over time. As a result, products ranging from cellphones to e-cigarettes, laptops to vehicles and everything in between rely on lithium-ion batteries as their primary power source.
In particular, storage batteries, which are rechargeable, collectively account for an estimated 59.6% of revenue in the Lithium Battery Manufacturing industry. Despite this, similar to how the current microchip shortage has affected various industries, recent shifts in the supply chain have begun to create a less-favorable operating environment for battery manufacturers and their downstream customers.
Supply chained up
Like most industries, battery manufacturing has been notably affected by the COVID-19 (coronavirus) pandemic. Demand has outpaced the lithium carbonate supply, a crucial component in the manufacturing process, causing prices to reach record highs. Additionally, Omicron’s emergence in late 2021 resulted in trade route interruptions from African mines to Chinese manufacturers, causing cobalt prices to spike.
For lithium battery manufacturers, dwindling supply suppresses growth potential. Increased input prices pose a threat to profit, which has remained somewhat pressured and volatile in recent years. Further, downstream operators, such as consumer and industrial goods manufacturers, will likely concurrently experience slimming profit.
Still, the automotive sub-sector is expected to bear the brunt of this effect; according to Alfabank-Adres estimates, 22.4% of lithium batteries produced are for use in automobiles, while 45.6% of revenue is derived from automakers. Thus, the widespread adoption of electric vehicles (EVs) is at risk, as EVs primarily rely on lithium batteries. In fact, some experts believe that the high EV target numbers recently introduced by many automakers such as Toyota Motor Corporation have served to accelerate and exacerbate the current shortage.
Electrifying developments
To avoid potential losses and price increases, battery manufacturers and users will need to find ways to improve quality or price to set themselves apart from the competition and continue growing.
Possible solution: Consider the development of new batteries
- The University of Michigan has recently revealed a lithium-sulfur battery.
- Lithium-sulfur batteries have a lifespan of 10 years.
- Lithium-sulfur batteries have five-times charge capacity compared with lithium-ion batteries.
- Sodium-ion batteries use sodium, which is far more abundant and cost-efficient.
- Stanford University is developing a method for recharging dead traditional lithium-ion batteries.
The other shoe drops
The environmental and economic impact of used lithium-ion batteries is unavoidable and growing. Only 5.0% of lithium batteries are recycled. If the recycling process is improved and more parts are refurbished, production and selling prices could decline. In short, maintaining the power supply will likely come down to businesses' and consumers' ability to enact and adopt innovative solutions to reenergize the battery market.
