These items will see the most price hikes in 2021, and number one matters to everyone

There is a commodity that does not appear in the retail sector, but is related to the national economy and people's livelihood, including energy commodities, basic raw materials, agricultural and sideline products and other categories, it is called "bulk commodities".

Commodities have been shining brightly over the past year. Prices of fossil fuels, agricultural commodities and industrial metals have risen throughout the year, and in some cases have more than doubled.

▲ Commodity ranking. Image from: Quartz

Foreign media Quartz analysis believes that this is due to the gradual recovery of the economy from the epidemic and supply-side restrictions on various products.

The fossil fuel sector was the best performer overall, largely as OPEC oil production cuts and energy commodity prices hovered low for much of 2020 as global shipments froze.

Coffee also performed well, driven by shipping restrictions and Brazil's dry and cold weather. Coffee prices have reached 10-year highs, and analysts expect the market to be tight into 2023, CNBC reported .

▲ Picture from: Getty Images

However, no commodity can rival lithium.

Lithium is a soft metal critical to batteries and one of the most important elements in our transition to a low-carbon future, even more so as the electric vehicle market takes off.

At the heart of an electric vehicle is a high-performance rechargeable battery, and while there are many types, lithium-ion batteries are still the first choice. Global demand for lithium will outstrip supply for the first time in 2021, and the gap is expected to widen, according to commodities market services provider S&P Global .

Data from Trading Economics showed that the price of lithium carbonate in China was 277,500 yuan per ton at the end of December, a 486% surge in 2021.

▲ Lithium price volatility. Image from: Trading Economics

This is where lithium differs from petroleum. Demand for oil has not grown exponentially, and the surge in oil prices is simply due to a return to normality in demand with a lag in the return to normal supply. In addition, the lithium industry with explosive demand was also affected by the epidemic, and a combination of factors led to a surge in lithium prices.

Most of the world's lithium comes from mines in Australia and South America, while China dominates battery manufacturing. S&P Global expects global supply of lithium in 2022 to be 55% higher than in 2020.

▲ Battery. Image via: Getty Images

Meanwhile, demand for lithium will grow 40-fold by 2040, when the economy will be more reliant on batteries than it is today, including the development of electric vehicles and utility-scale energy storage, according to the International Energy Agency.

Now, investors in China and elsewhere are pouring billions of dollars into new lithium mines.

The good news is that there is plenty of lithium available for mining, but the problem is the environmental problems that mining creates.

Current lithium production is extremely water-intensive , and traditional mining methods tend to destroy land and eradicate plants, making arid regions with lithium deposits "additional".

▲ Picture from: greenbiz

That means a delicate balance is required to develop lithium, which we use to fight climate change rather than cause more environmental or community problems.

Although less-impact mining methods have emerged, battery developers will likely be investing in technologies that bypass lithium entirely because lithium prices are so high.

A California lithium-ion battery supplier told Forbes that the recent surge in lithium prices has really had an impact on their business:

“Costs are growing faster than prices, while component quality is deteriorating. As a result, we have to take on more service-related costs. Some components become unavailable and we have to increase engineering investment instead of outsourcing.”

▲ References:
1. https://qz.com/2109227/lithium-was-the-hottest-commodity-of-2021/
2. https://www.forbes.com/sites/rrapier/2021/12/31/the-challenges-posed-by-rising-lithium-prices/?sh=6760974e3af9

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