It's Hard to Keep Up With All That Lithium Demand
Comment of the Day

August 23 2017

Commentary by Eoin Treacy

It's Hard to Keep Up With All That Lithium Demand

This article by Laura Millan Lombrana and Jonathan Gilbert for Bloomberg may be of interest to subscribers. Here is a section:

Producers everywhere have struggled to keep up with demand as electric cars went from almost no sales a decade ago to more than half a million vehicles last year. The battery in a Model S from Musk’s Tesla Inc. uses about 45 kilograms (100 pounds) of lithium carbonate. More mines are planned, but difficulties at Olaroz -- the first new South American lithium mine in two decades -- are limiting funding for new ventures in Argentina, home to the world’s third-largest reserves.

“The uncertainty on the supply side is driving prices up and making investors nervous,” said Daniela Desormeaux, CEO of Santiago-based lithium consulting firm SignumBOX. “We need a new project entering the market every year to satisfy growing demand. If that doesn’t happen, the market will be tight.

Eoin Treacy's view

Tesla gigafactory might be the first large-scale lithium battery plant for vehicles and powerplants but it is just the beginning of what is a significant build out in production capacity as progressively more auto manufacturers roll out plans for electric vehicles. Against that background miners are scrambling to keep up with supply. This is about as close as a throwback to the heady days of the commodity boom as one might wish for and is a fresh example of the supply inelasticity meets rising demand model. 

In much the same way that iron-ore is concentrated in the hands of a relatively small number of miners, a small number of companies dominate lithium production. That number will increase as prices rise and new projects come on line but the number is still comparatively small. FMC, Albemarle, Sichuan Tianqi Lithium Industries and SQM are the largest producers and share similar patterns of medium-term demand dominance. 




Orocobre is an evolving pureplay on the sector and is back testing the lower side of its yearlong range. 

Mineral Resources has surged higher over the last couple of months as its Mount Marion Project has come on line. Neometals is also a partner in that development but the share shows little sign of benefitting from it so far. 


This article from Bloomberg highlighting the newly evolving trend of family formation among millennials and continued appetite for SUVs suggests growth of electric vehicles is likely to overtake smaller vehicles and second cars well before the primary household vehicle market. 

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