Lithium price uncertainties due to the development of battery technology under carbon neutrality target

Driven by carbon neutrality target, a faster low-carbon transition will be required in the sectors of electricity and transportation. As a major support for the transition of these sectors, the diffusion of battery technologies in energy storage and electric vehicles will be accelerated. The battery technologies development relies on the price stability of critical materials (nickel, cobalt, lithium), but the price fluctuations caused by potential supply-demand imbalances would become a bottleneck constraining the low-carbon transition and hindering the sustainable application of low-carbon technologies, especially in regions like China where rapid demand expansion intensifies the need for critical material resources (e.g. lithium). Existing researches have paid limited attention to the dynamic changes in metal market, and simplified the influence of supply-demand shifts, as well as internal & external environments, affecting metal prices. Consequently, this study develops a system dynamics model to forecast the metal prices by taking lithium as a case study. The model characterizes the transmission mechanism between market dynamics and lithium prices, starting with supply-demand shifts driven by the carbon neutrality target. The impact of uncertainties (such as carbon-neutral industry demand, production capacity planning, the lithium futures market, import dynamics, and unexpected events) on prices is also investigated. The results suggest that accelerated development of low-carbon technologies could increase average price by approximately 10 % (0.05 million CNY/ton). Among the uncertainties, active futures trading could push prices up by as much as 3.05 million CNY/ton, while substitute import options could reduce prices no less than 0.2 million CNY/ton.