The Impact of Electric Vehicle Demand and Battery Recycling on Price Dynamics of Lithium-Ion Battery Cathode Materials: A Vector Error Correction Model (VECM) Analysis

Jung Youn Mo and Wooyoung Jeon
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Jung Youn Mo: Korea Institute for Industrial Economics and Trade, Sejong 30147, Korea
Wooyoung Jeon: Department of Economics, Chonnam National University, Kwangju 61186, Korea

Sustainability, 2018, vol. 10, issue 8, 1-15

Abstract: The recent rise in demand for electric vehicles (EV) and energy storage supporting power systems has increased the demand for lithium-ion batteries (LIB), and it is expected to be more significant in near future. However, materials for LIB, such as lithium and cobalt, may face limited supply due to oligopolistic market characteristics, and this can have a significant impact on prices of LIB materials. This paper examines the dynamics of LIB raw material prices (cobalt, lithium, nickel, and manganese prices) with EV demand using the Vector Error Correction Model (VECM) method. The result shows that the EV demand is important in short-run dynamics of cobalt and lithium prices, which indicates that the recent increase in lithium and cobalt prices has been caused by increase in EV demand. In the long-run equilibrium, lithium and nickel prices move inversely with cobalt prices. The impulse response results confirm that EV demand has an immediate positive effect on cobalt price, and the effect maintains over two years. On the other hand, the EV demand shock to nickel, lithium, and manganese prices is relatively small. This study also analyses the impact of recycling policy of LIB on material prices. Finally, the paper discusses the policy implications for stabilizing material prices of LIB.

Keywords: lithium ion battery; lithium price; cobalt price; electric vehicle demand; battery recycling; granger causality; VECM (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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