Another in the Annals of Free Markets For The Win:
Sky-high prices for lithium carbonate, the key element for batteries that last year surged to $80,000 a tonne when fears over a supply crunch peaked, also played a role. Miners and refiners greenlit projects or maxed out capacity to cash in on the boom, pushing production up and prices down. Lithium carbonate last week traded at $21,000, a 75 per cent fall.
Was it last week or last month that politics was still mithering about the coming lithium shortage? Actually, we’re really pretty certain we could still find politicians worrying about it today and we’ll be able to do so for years yet. Because politics simply never can get its head around the power of markets.
So, yes, moving the world to EVs will need lots of lithium. Which is why the price rose, lots of people wanted lots of lithium. So, what then happens? Well, as that chart on pages two and three of every economics book ever says an increase in demand, having driven up the price, encourages an increase in supply. Assuming that there’s no hard, physical, shortage - the number of atoms on the planet sort of limit - then supply will increase, price will fall again. This is the sort of economic idea that we insist children grasp before we allow them to do the difficult parts of the subject at GCSE level.
So, what did happen? Iran found mountains of lithium. China Clay pits seem to be teeming with the stuff. We don’t need that much and as we pointed out at book length we don’t face that hard physical limit.
There’s a list out there of some 300 would be lithium mining companies. For that’s what the market response has been - the lithium price rises, men with hammers go out to tap the world. And, amazingly, given that lithium is not in short supply, only in currently short extraction, they find it. The value of lithium in the ground falls further and faster than this 75% fall in the purified stuff too. The share prices of those would be lithium miners are falling - globally and near in unison. Because we’ve found enough and it only took a couple of years. It was also done without politics or even subsidy.
Oh, sure, there were both of those, both politics and subsidy. But the shortage was solved without either.
We’re entirely willing to agree that there is a reason to have government for there are some things that have to be done and which can only be done by governments. We are not, after all, anarcho - capitalists. We do also insist that there are things which markets entirely unadorned can achieve and even a class of things which markets will achieve better than any government will manage.
Like, umm, sourcing sufficient lithium to power the global car market?
The point to note here being that it has happened that way too. We’re done here. And all before government managed to burn too much of our money in failing to do it.