Battery material prices surge from ESS demand, supply constraints, providing boost for domestic industry amid EV slowdown
Global automakers are increasingly withdrawing or delaying their electric vehicle (EV) transition plans, heightening tensions in the domestic battery industry. Meanwhile, prices of key battery raw materials such as lithium, nickel, and cobalt continue to hit record highs, forming a steep upward trend.
Securities firms analyze that this surge in raw material prices could lead to increased battery sales prices, potentially serving as a short-term momentum for improved performance.
According to Trading Economics on the 14th, the price of lithium carbonate surged by 7,500 yuan (4.93%) from the previous day, closing at 159,500 yuan per ton. Starting from 94,000 yuan on December 1 of last year, the price of lithium carbonate has risen approximately 69% as of that day, marking the highest level since November 2023.
Nickel started at $14,800 per ton in December of last year and rose to $17,900 by that day, increasing approximately 20% in a month. Cobalt also surpassed $48,500 per ton in December of last year and jumped to $56,000 within a month, a surge of approximately 15.5%.
This trend in raw material prices contrasts sharply with the recent atmosphere in the EV market. Global automakers, unable to withstand weak demand and production cost burdens, are not only adjusting their pace but also fundamentally revising their strategies.
The U.S. abruptly abolished EV subsidies in October of last year, shifting its policy focus toward internal combustion engines. The European Union (EU) also effectively withdrew its ban on new internal combustion engine vehicle sales, which had been set for 2035. Consequently, Ford, Mercedes-Benz, and Volvo have partially revised their existing plans to transition to pure EVs by 2030.
Researcher Jo Hyun-ryeol from Samsung Securities stated, “This year’s EV demand is expected to reach 23.5 million units, a mere 9.4% increase from last year,” adding, “Compared to last year’s 20.7% growth, a slowdown in the EV market’s growth rate seems inevitable.”
Although EV demand has decreased, prices of key raw materials — lithium, nickel, and cobalt — continue to rise. This is due to increased demand for energy storage systems (ESS) and sharp supply reductions caused by policy changes in various countries.
Lithium prices are rapidly increasing as ESS investments precede the rise in power demand driven by the spread of artificial intelligence (AI). Lithium is a core raw material not only for NCM batteries used in EVs but also for LFP (lithium iron phosphate) batteries primarily used in ESS. Global power demand is projected to reach 890 terawatt-hours (TWh) by 2030, 1,800 TWh by 2040, and 3,000 TWh by 2050.
Chinese government policies have also fueled lithium price increases. The Chinese Ministry of Finance announced that the value-added tax export rebate rate for battery products will be reduced from 9% to 6% starting in April and will be completely abolished from 2027. Reuters reported that this has led to a short-term surge in lithium demand as companies rush to export. Additionally, mine shutdowns and production restriction policies have compounded supply pressures.
Supply constraints are the direct cause of the strong performance in nickel and cobalt prices. Nickel experienced a long-term decline due to a surge in supply from Indonesia after 2023, but the market sentiment reversed when the Indonesian government announced a 34% reduction in nickel mine production compared to the previous year.
Cobalt supply has also decreased due to export restrictions and quota systems in major producing countries. Researcher Ok Ji-hoi from Samsung Futures stated, “By 2026, the global cobalt market is expected to shift from a supply surplus to a supply deficit, with exportable volumes limited to approximately 40% of production.”
Securities firms suggest that the strong performance of raw materials could become a momentum for improving the performance of the domestic battery industry, which is in a slump. This is because rising raw material prices lead to higher battery selling prices through price-linked structures, potentially expanding sales volumes.
Researcher Han Byung-hwa from Eugene Investment & Securities stated, “Over the past 2-3 years, mineral prices such as lithium have excessively fallen and are now recovering,” adding, “If the strong performance of key minerals continues, battery companies can pass on the prices to customers, increasing sales, which is positive for the domestic battery industry.” However, he analyzed, “If prices exceed 200,000 yuan per ton, which CATL previously mentioned as the break-even point, cost competitiveness could decline.”
There are also opinions that a selective approach is necessary since sales volume itself will not increase. Researcher Jang Jeong-hoon from Samsung Securities stated, “Price increases due to policy changes are clearly positive for the secondary battery material value chain,” but added, “The abolition of U.S. EV tax credits and the aggressive moves of Chinese companies in the European market remain burdensome factors for demand.” He advised, “A strategy focusing on companies with low U.S.-bound proportions or those capable of defending their volumes due to supply chain issues related to decoupling from China is desirable.”
