Electric steel supply and demand could affect electric vehicle prices later in the decade

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why does it matter: Much of the current conversation about electric vehicle manufacturing has focused on lithium sources for batteries. However, another important component of electric vehicles could be lacking in the next few years – electric steel. Manufacturers in the United States are trying to ramp up production to compete in an industry dominated by foreigners.

Analysts estimate that global supplies of electrical steel – needed for electric vehicle motors – may struggle to meet demand before the end of this decade. New companies are entering the market to avoid a crisis that could lead to an increase in the price of electric vehicles at a time when we need them to be more affordable.

Electrical steel consists of very thin sheets that convert electricity into mechanical energy. Standard quality electrical steel forms the core of the rotary motors that power things like washing machines, power transformers, power tools, or air conditioners. Electric vehicle motors and scientific instrumentation follow the same principle but require high-quality electrical steel, which is hard to come by.

according to Wall Street Journal Report, manufacturing high quality electrical steel is a tedious process, with lead times sometimes approaching a full year. It involves stamping and stacking steel and silicon into precise shapes, sometimes as small as a quarter of a millimeter, so companies can’t simply buy their way to market.

The vast majority of electrical steel currently comes from South Korea, Japan and China, which analysts say are subject to US steel import duties. Moreover, global demand for high-quality electrical steel could exceed supply by hundreds of thousands of tons by 2027 and more than 1 million tons by 2030.

US companies such as Cleveland-Cliffs Inc. and US Steel Corp. will make millions to open new electric steel plants to help bridge the gap and raise the country’s competitiveness in this specialized sector. The company plans to have the mill up and running by the end of the year. However, it will likely take several years for local manufacturers to acquire the equipment and expertise to significantly improve supply. The resulting situation could put downward pressure on EV manufacturing.

The analysis contrasts with reports Lower prices for other raw materials for electric vehicles, making cars cheaper in the short term. Since January, prices for electric vehicle battery components, such as lithium and copper, have fallen by about 20 percent. Tesla has passed the savings on to consumers with five price adjustments this year. It is unclear how long the situation will last or what will happen if it faces a shortage of electrical steel.

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