Little-known lithium has emerged as the hottest commodity of the moment as investors look for a way to cash in on the anticipated flood of electric cars into the marketplace.
“I just think people are realizing there are going to be an awful lot of lithium batteries used in electric vehicles over the next while,” said Jon Hykawy, an analyst at Byron Capital Markets. He said that if a couple of million electric cars are sold in the next five years, that alone would equate to about 10% to 15% of current lithium demand.
The market for lithium, a very light silver-white metal, has grown steadily over the past decade thanks to rising demand for batteries in consumer electronics such as mobile phones and laptop computers. But it is the pending release of the Chevy Volt, the Nissan Leaf, and other electric vehicles that is getting investors most excited about the metal. Some auto companies are already speculating that pure-electric cars could make up 10% of vehicle purchases by 2020, which could put major strain on lithium supplies if it happens.
“The real inflection point is that an automobile needs about 3,000 times as much lithium as a cell phone. This is where we’ve got a very large potential supply requirement,” said Jay Chmelauskas, president of Western Lithium.
The fact that the electric car build-out is getting billions of dollars of subsidies and strong political support, particularly in the United States and China, only adds to the excitement for lithium. In the United States, the support comes as no surprise given the government controls General Motors. But China has also emerged as a leader in electrification. It is the world’s largest car market, and experts said that almost every company producing lithium-ion batteries for cars has a plant in China.
Jon Hykawy said that the price of lithium, which is not widely published, reached about US$6,600 a tonne this month. That compares with about US$2,500 a tonne at the beginning of the decade. The biggest source of lithium is Chile, and Argentina and Australia are major producers as well. Bolivia is described by some as the Saudi Arabia of lithium, but experts said that a lot of the deposits there are contaminated with magnesium and are too costly to mine. Political risk has also kept many companies out.