Prices of lithium are rising that market watchers are now calling it the hottest commodity in the planet today.
This mineral, which is silver in color, is high energy density. In its pure form, lithium reacts violently to water necessitating chemical extraction from hard rock and brine. More than 70 percent of the lithium supply in the world is sourced from the Southern American countries of Chile, Bolivia, and Argentina.
Lithium powers modern life. Almost all electronic devices today are powered by lithium-ion batteries, a technology that was first used in the 1980s by Sony. Lithium is also used in other applications like ceramics, lubricants, and glass.
Leading investment banking firm Goldman Sachs, in fact, called lithium the new gasoline. After all, all plug-in electric cars that are sold today are powered by battery packs that are composed of cells with lithium-ion. One of the main ones is the popular Tesla electric cars which are wickedly fast.
It is forecasting that the demand for the mineral would be buoyed by the rising production of electric vehicles. It particularly predicts that demand for use of lithium would grow 11 times this year to around 300,000 tons by 2025.
The Economist, meanwhile, calls lithium the hottest community in the world today. It even mentioned in a recent article that the largest battery producers in the world are in a mad scramble to secure supplies of the mineral, prompted by high demand from end-users like carmakers.
The UK-based publication noted that the price of pure lithium carbonate imported by China grew by more than 100% in the last two months of 2015, putting the price at around $18,000 for every ton.
Electric Vehicle Demand
One doesn’t need to be a market specialist to understand why lithium prices are at an all-time high.
For one, the demand for electric vehicles is also increasing. EVs need lithium-ion batteries in order to move.
In the United Kingdom, plug-in vehicle registrations reached an all-time high in 2015, with more than 20,000 new ultra-emission vehicles added. In the US, electric vehicle sales grew by 15 percent in January this year.
Bloomberg Energy predicts that sales of EV will hit 41 million by 2040, or 35 percent of new light duty vehicle sales. It would represent 80 times of the equivalent figure for 2015 when EV sales worldwide were below 500,000.
Electric vehicle companies, too, are scrambling to meet market demand.
Tesla will soon unveil its mass market model, Tesla 3. The price tag of the vehicle, about $35,000, is comparable to those of other gasoline-powered sedans.
Even Apple and Google have announced plans of coming up with their own electric cars before the turn of the new decade, putting in on a direct clash with Tesla.
Aside from the fact that owners now can get more mileage out of their EVs, the lower costs of lithium-battery is also a reason why motorists are now shifting to electric vehicles. Compared to prices in 2010, lithium-ion batteries are now 65 percent cheaper.
While EVs are becoming more affordable, the mineral lithium is becoming more and more expensive.
For instance, lithium carbonate was sold at around $6,000 per ton in 2011. By the end of 2013, its price was nearly $7,000. Today, it costs around $8,000. The amazing performance of lithium looks incredible when you compare it against nickel and aluminum, both of which have been spiraling in recent years.
China is a different story, with lithium prices skyrocketing in the past five months to the point that a ton now costs around $18,000.
As proof of the surge in lithium value, one of the most reputable companies in space, Avalon Rare Metals, recently changed its corporate name to Avalon Advanced materials. It also shifted its focus to lithium.
Demand is expected to further grow, raising questions on whether production capacity can meet up with the demand.
Citigroup, for one, says that worldwide demand for this mineral will increase by 65 percent in the next five years. Global advisory firm Global Lithium LLC, meanwhile, projects worldwide demand to quadruple in the next decade. Studies also indicate that $2 billion will have to be spent in the next decade to ensure that lithium supply will be able to keep up with the demand.
Demand for lithium is not only being affected by rising use of electric vehicles, but other electronic devices such as smartphones and tablets. This early, it is projected that smartphone sales will reach 2.3 billion in 2019 from the 1.9 billion recorded in 2014.
To date, the lithium market is being controlled by four companies with only a handful of firms seen to add to the supply over the next few years. It will be interesting to see how these companies can meet the growing demand for lithium given the boost from the electric vehicle market as well as the smartphone market.