Lithium Miners are Setting Out to Tap New Reserves
The Electric Vehicle (EV) is here, there is no going back now
As I have said in the pas Lithium is the new fuel, but the reserves the miners are currently tapping into are finite, and investors can take to the bank.
The Big Q: Has lithium got too popular too fast?
There is a lot of Buzz about EVs but do they have a real and economical future or are they a fad?
Many people are skeptical, but demand for lithium is rising quickly, and all indications indications that a coming shortage is up ahead.
One analyst I read says, “It will not be a shortage in terms of ‘Peak Lithium’. It will be a game of catch-up with the electric car boom, with miners setting out to explore and tap into new reserves.”
Consider the number of battery that are being built around the world.
We have all heard about Tesla’s (NASDAQ:TSLA) Nevada facility that may produce enough batteries to power 500,000 electric cars per year by Y 2020.
This is more than the global total lithium-ion battery production for Y 2013.
That is an impressive rate of demand growth over 3 year, and the growth represents a change in the way analysts and investors think as opposed to 10 years ago when I 1st became aware of the energy source.
Lithium is powering many of the things which consumers depend on and the things our electronic future is being built upon.
There are no signs of contraction, just expansion.
Think the Internet of Things, smartphones, smart cars, smart houses, and smart cities. All these are powered in some way by lithium.
But, 1st and fore most the big demand will be for EVs. Forecasts from market research firms is unanimous.
According to Lux Research, the EV market will grow to $10-B within the next 4 years.
According to Navigant Research forecasts EV sales will rise from 2.6-M last year to more than 6-M in Y 2024.
EVs are coming and they are charging into our motoring lives.
From where everyone is standing right now, it may seem that the world’s got a goodly amount of lithium.
According to global estimates by the US Geological Survey, there is enough lithium in the world, 13.5-M tonnes of it to last us over 350 years if made into batteries.
This calculation takes into account only the current rate of lithium-ion battery usage. It does not account for the entrance of EVs into the consumers mainstream living, meaning pending energy revolution that sees lithium as its leader.
Demand is growing faster than production, and for now this new demand is coming increasingly from the electric vehicle industry.
There are at least 12 lithium-ion battery factories being built around the world according to Benchmark Mineral Intelligence and these “gigafactories” will raise the global demand for lithium-ion batteries to some 122 GWh by Y 2020. That is up from 35 GWh currently.
This is huge growth over a very short period of time.
In the US there is 1 gigafactory under construction by Tesla’s, in Nevada. A 2nd gigafactory is in the works by LG Chem.
But you also have to understand the supply and demand picture for this metal/mineral.
Macquarie Research estimates that in Y 2015 demand for lithium already exceeded supply, while this year, lithium output will again fall short of demand.
In Y 2017, due to new production capacity the metal’s fundamentals will near supply/demand equilibrium, which will last for about a year before deficit happens again, but this time the deficit will endure. Despite new efforts to ramp up supply, it will take a while before supply corresponds to the demand analysts tell us.
That being the case, industry is looking at a period of shortage, and shortage is where the savvy investors can make real money.
The lithium demand has just begun.
Consumer electronics keeps it safe and steady, the electric vehicle boom skews the demand picture dramatically, and the future’s energy storage and powerwall evolutions could take it “over the edge”.
From what I have learned, the reserves are there, geologists estimate there is a lot of unproven reserves, so it is just a matter of who finds them first, and who starts extracting first.
Lithium has the purest of fundamentals of any ‘commodity’ I am looking at, so expect to see Lithium Barons emerge.
Demand/Supply terms are simple and visible, meaning there’s a lot of new money around for lithium exploration.