5 ms·

How is this contrary to conventional economics? Using the most basic model of supply and demand, EVs becoming more popular would shift the demand curve to the r

How is this contrary to conventional economics? Using the most basic model of supply and demand, EVs becoming more popular would shift the demand curve to the right, since more people would want to buy Li-ion batteries at any given price. We would expect the market equilibrium to shift both upward and rightward, increasing both quantity and price. It might only shift only one way or the other, if supply is particularly elastic or inelastic. But it definitely wouldn't cause a decrease in price by itself.

bryanlarsen 4y ago
https://en.wikipedia.org/wiki/Experience_curve_effects https://en.wikipedia.org/wiki/Experience_curve_effects
- Manuel_D 4y ago
  The effects of experience curves vary widely between different industries. For semiconductors, it's huge. For mining, not so much. Battery costs are only 25% manufacturing. So at this point, battery supply is rapidly becoming a resource extraction problem.
  - bryanlarsen 4y ago
    The scale effects in mining are very significant. Big mines are a lot cheaper per tonne than little mines.
    - LegionMammal978 4y ago
      This is no longer a question of economic axioms, but of the facts on the ground. How do we know that the scale effects relative to lithium mines as they stand today will be sufficient to offset the price increase inherently caused by the increased demand? Do you have a source for this?
      - bryanlarsen 4y ago
        The increased demand only causes a temporary increase in price. Lithium is a commodity, and for commodities price == marginal cost. The marginal cost for lithium is about 1/10th of the current price, so the price of lithium will eventually fall. Of course "eventually" could be a long time away...
    - Manuel_D 4y ago
      Then why is cost up 10x over the last two years?
      - bryanlarsen 4y ago
        Price is up 10x. Cost hasn't changed.
        Manuel_D 4y ago
        Cost is literally another word for price - I'm not sure what you're trying to convey by trying to distinguish the two. When a battery manufacturer goes to buy a ton to lithium, the cost they have to pay has indeed increased 10x. The price of extracting a ton of lithium from the ground may be the same, but it's not enough to keep up with demand. Which is why the cost of lithium on the market is skyrocketing.
      - jcampbell1 4y ago
        Price is up because it takes 18-24 months to produce lithium on the margin. The primary source of lithium is solar concentrated brine, so today’s supply is peak Covid planning decisions. The people that had the guts to invest in lithium production in the middle of Covid when the price was in the tank, are currently harvesting that lithium and getting a massive payday. Price will come back down.
ajross 4y ago
This is predicated on the assumption that Lithium is a scarce resource with new new sources available. In fact the opposite is true: Lithium is pervasively available almost everywhere[1], the problem is that it's expensive to extract and requires a bunch of processing facilities be built. So you'd absolutely expect Li supply to grow along with demand and push prices down due to economies of scale. And that's exactly what we're seeing. [1] Basically, go find a salt deposit -- that's a dried up ocean, which is the best concentrator we can find for Lithium compounds.

bryanlarsen 4y ago

https://en.wikipedia.org/wiki/Experience_curve_effects https://en.wikipedia.org/wiki/Experience_curve_effects

Manuel_D 4y ago
The effects of experience curves vary widely between different industries. For semiconductors, it's huge. For mining, not so much. Battery costs are only 25% manufacturing. So at this point, battery supply is rapidly becoming a resource extraction problem.
- bryanlarsen 4y ago
  The scale effects in mining are very significant. Big mines are a lot cheaper per tonne than little mines.
  - LegionMammal978 4y ago
    This is no longer a question of economic axioms, but of the facts on the ground. How do we know that the scale effects relative to lithium mines as they stand today will be sufficient to offset the price increase inherently caused by the increased demand? Do you have a source for this?
    - bryanlarsen 4y ago
      The increased demand only causes a temporary increase in price. Lithium is a commodity, and for commodities price == marginal cost. The marginal cost for lithium is about 1/10th of the current price, so the price of lithium will eventually fall. Of course "eventually" could be a long time away...
  - Manuel_D 4y ago
    Then why is cost up 10x over the last two years?
    - bryanlarsen 4y ago
      Price is up 10x. Cost hasn't changed.
      - Manuel_D 4y ago
        Cost is literally another word for price - I'm not sure what you're trying to convey by trying to distinguish the two. When a battery manufacturer goes to buy a ton to lithium, the cost they have to pay has indeed increased 10x. The price of extracting a ton of lithium from the ground may be the same, but it's not enough to keep up with demand. Which is why the cost of lithium on the market is skyrocketing.
    - jcampbell1 4y ago
      Price is up because it takes 18-24 months to produce lithium on the margin. The primary source of lithium is solar concentrated brine, so today’s supply is peak Covid planning decisions. The people that had the guts to invest in lithium production in the middle of Covid when the price was in the tank, are currently harvesting that lithium and getting a massive payday. Price will come back down.

ajross 4y ago

This is predicated on the assumption that Lithium is a scarce resource with new new sources available. In fact the opposite is true: Lithium is pervasively available almost everywhere[1], the problem is that it's expensive to extract and requires a bunch of processing facilities be built. So you'd absolutely expect Li supply to grow along with demand and push prices down due to economies of scale. And that's exactly what we're seeing. [1] Basically, go find a salt deposit -- that's a dried up ocean, which is the best concentrator we can find for Lithium compounds.