Lithium Boom – The World’s Hottest Commodity Just Got Hotter
Article includes excerpts from Oilprice.com, Lithium Investing news & other sources:
Lithium is the hottest commodity on the planet right now. It is the most important component of electric vehicles, high-energy batteries, power storage, a vast menu of consumer electronics—and even Nirvana-reaching drugs.
Even today’s hyper-growth EV industry is just the tip of the iceberg compared with where it’s headed.
Bloomberg New Energy Finance predicts that 35% of all new vehicle sales by 2040 will be EVs, equivalent to 100 million units every year.
Tesla’s “halo effect” will make astute investors lifetime riches because that’s 100 times greater than current production.
All that growth will present some serious supply chain challenges. But in this massive opportunity, the key to everything is GRADE. Not all lithium is equal.
The majors can increase production, but only to a certain degree–and not nearly fast enough to meet growing demand. If you are looking for outsized gains on your lithium investment, you need to expand your horizon to new entrants with high-quality reserves.
High-grade lithium producers are where EVERY EV manufacturer will be looking as they seek to keep battery production costs low.
Below is a list of the top eight lithium-producing countries in the world.
- Australia – Mine production: 14,300 MT
- Chile – Mine production: 12,000 MT
- Argentina – Mine production: 5,700 MT
- China – Mine production: 2,000 MT
- Zimbabwe – Mine production: 900 MT
- Portugal – Mine production: 200 MT
- Brazil – Mine production: 200 MT
- United States – Mine production: Unknown
Prices of battery-grade lithium in China, the biggest Li-ion battery producer, surged above $20,000 per tonne in 2016–much higher than the global average.
Now, China has traditionally sourced its lithium from Australia, but increasing competition in the EV space and falling prices of EVs has forced it to look elsewhere for cheaper sources. Chile for example mines lithium from brines located just below easily accessible salt flats. The Atacama salt flat in Chile is the source of 37 percent of the world’s entire lithium production.
Chinese and Korean investors are already engaged in advanced talks with the Chilean government to open up a huge $2 billion Lithium battery plant to feed on the country’s rich lithium reserves. This could kick off an even more ferocious scramble for the precious metal–especially if China starts hoarding and puts further pressure on already constrained supplies.
But with rocketing demand, pressure is on to identify and exploit new resources. Plenty of opportunities exist. Japanese company Hanwa is a cornerstone investor into the Sonora lithium Project in Mexico to supply the fast-growing Asian battery market.
And operated by European Metals Holdings, the Cinovec lithium resource in the Czech Republic is expected to become the central lithium supply hub for European EV industry.
Low production costs are extremely important for EV manufacturers, now more than ever.
Batteries and power trains account for the biggest chunk of EV manufacturing costs. The high cost of these line items is the #1 reason why EVs have remained pricier than they could be. But advancements in battery technology have helped bring costs down–so much so that Tesla can now afford to offer the Model 3 for just $35,000, or half the price of an entry-level Model S.
Near-future demand is so overwhelming that we are in real danger of massive deficits. Current global Lithium-ion cell production can only supply 900,000-1 million electric vehicles.
Tesla is on course to kick off production of its first mass-produced vehicle–the Model 3– in July, and has already amassed 373,000 reservations. That’s five times the company’s 2016 sales.
Tesla has a goal to produce 500,000 Model 3s per year by the end of 2018, and could hit a million units as early as 2020. The company also sells home and industrial energy products, including Powerwalls. About 51Kg of Lithium goes into each Model S, while each Powerwall 2.0 unit packs 10Kgs of the metal.
Source: Visual Capitalist
Global production will ramp up more than 500 percent between 2016 and 2020, and while China will be doing much of the heavy lifting, the emerging resources in USA and Europe will all have a key role to play too.
Source: Visual Capitalist
By 2025, the battery market alone will be twice as big as today’s entire lithium market.
Therein, of course, lies the massive opportunity. Investors will want to identify owner / operator companies, and investment vehicles involved in a spread of risk – ranging from early stage resources to assets close to / in production. Time is of the essence though: these heady growth projections will be mirrored in stock price gains.
Excerpts from Oilprice.com article. Other sources Lithium Investing news:
Cadence Minerals (KDNC.L) is a unique early investment strategy & development firm, within the mineral resource sector. We identify undervalued assets, with irreplaceable strategic advantages. We invest in them and help turn them into powerhouses. Lithium and other technology minerals must get to market in order to achieve the global green revolution. We uncover new ways and places to extract and process these minerals, so that burgeoning demand is met; and our tomorrow is better.