The surge in prices of lithium, the key battery material used to power electric cars, is seemingly unstoppable.

Lithium carbonate hit a fresh record of C¥500 500 (R1.3-million) a ton in China Friday, according to data from Asian Metal. Prices more than tripled in the past year, inflating the cost of batteries used in electric vehicles, with recent gains driven by strong demand and disruptions at a domestic producing hub.

Consumer support for electric vehicles has been gathering pace amid a global transition away from fossil fuels. The China Passenger Car Association has raised its forecast for sales of EVs to a record six million this year, double the total in 2021, while battery usage in the nation is also expected to almost double, according to Bloomberg Intelligence.

Meanwhile, a power crunch during August in Sichuan province — home to more than a fifth of China’s lithium production — caused two weeks of electricity cuts, hampering supply in an already-squeezed market.

“EV production and sales have held steady in recent months,” according to Rystad Energy, a research firm, which added there are concerns over whether China’s power crisis could return this winter when demand for heating rises. “This could lead to new power shortages and hit lithium operations,” it wrote, expecting prices to stay firm around this level through to the end of the year.

China held a meeting to review developments on Thursday and asked the top companies to help stabilise prices, according to the ministry of industry and IT. Producers should not collude on pricing and not quote prices that deviate a lot from costs, it said. The government will take steps to encourage exploration, stabilise imports and promote recycling, it added.

Read: South Africa needs to stop taxing EVs unfairly: Mercedes-Benz CEO

On Thursday, Soc Quimica & Minera de Chile, the world’s second largest lithium producer, predicted a “very tight market” in the years ahead. SQM sees “slightly higher” prices this quarter from the previous three months and expects prices to stay at similar levels in the fourth quarter, according to a presentation to investors in New York.

Battery makers and the motoring industry have been rushing to lock in reliable and stable supplies of lithium. Still, the raw-material price hikes are likely to stoke inflation concerns and add cost pressures to the supply chain.

Read: Xiaomi in JV talks ahead of planned electric car launch

A battery-making unit of China’s top producer, Ganfeng Lithium, told customers last week that prices for new orders would be reassessed amid a substantial hike in power-cell costs. The company supplies small polymer lithium batteries for smart wearable products and Bluetooth headset batteries for companies including Xiaomi. — Annie Lee, (c) 2022 Bloomberg LP