The age of electrification across the transportation sector. Also the solar panel revolution, and Tesla’s battery gigafactory. They are so so much igniting a battle for the cheapest battery. That ALONE will transform lithium into a boom-time mineral. Most noteworthy and the hottest commodity on the energy investor’s radar. It has been easy to take lithium for granted. This wonder mineral is the backbone of our everyday lives. It’s popping up in everything. That’s from the glass in our windows to our tons of electronics.
And yes investors have long appreciated the steady rise in demand for lithium. However the number of new applications continues to multiply. Therefore smart phones, tablets, laptops, and other consumer electronics. They all demand more lithium. But the largest driver for future lithium use will be in electric vehicles. As well as home batteries for solar panels. That has lithium on the verge a boom. Please note, for which supply can no longer be taken for granted.
Not since the shale boom have we seen a market transformation of such significance. Lithium has long been used for a variety of mundane purposes. Also and while the variety is spectacular. So with applications in everything from glass, ceramics and greases. All to a line-up of industrial process. Therefore it has flown under the radar for most.
First off, supply is always largely managed to keep pace with steadily rising demand for lithium. Yet while the mineral slated for growth with or without the ‘battery explosion’ and now Tesla’s gigafactory. All will spark a phenomenal spike in demand. Demand that will be no less exciting than the shale boom.
Not only will battery gigafactories change an already attractive lithium demand picture. However the suppliers themselves will change. It’s making way for newer entrants—with more foresight and better technology. So that will give some of the best investment opportunities in the sector.
The lithium story cannot be told without first telling the Tesla story. So Tesla Motors (NASDAQ:TSLA) is producing the Model 3 at a fast clip. In addition Powerwall production also is ramping up. Then Elon just announced the Model Y which will go directly at every mid class priced SUV.
Now Tesla just got $500 plus million dollar loan from the Chinese to build the gigafactory there in China. So this it is constructing a $5-billion gigafactory to build 500,000 electric cars with the aim of lowering the cost of batteries by at least 30 percent.
Moreover, around one-quarter of the plant’s capacity may be for Tesla’s stationary storage business. I’m getting two Powerwalls for my house. All which sells backup batteries for homes, businesses and utilities. Again all fueled by lithium.
According to Tesla’s brainchild, Elon Musk, demand for stationary storage batteries is skyrocketing. Skyrocketing to the point that expanding the gigafactory may have to be considered. Especially before it built.
Lithium is the lightest and most versatile of the metals. It is the backbone of this exploding battery market. Lithium is already a key part of our everyday lives, but as batteries become the rule of the day in a new global energy picture, demand for lithium is soaring. Also, we are only at the beginning of this curve.
Battery manufacturers across the board are moving to lithium. That’s because it has the highest electric output per unit weight. And nowhere will this demand soar more than with producing of hybrid, plug-in hybrid and electric vehicles. Vehicles used by everyone from Toyota (NYSE:TM), Honda (NYSE:HMC), Nissan (NYSE:NSANY), Renault (EPA:RNO), and Mitsubishi (NYSE:MSBHY), to Ford (NYSE:F), Chevrolet and GM (NYSE:GM). And of course Tesla Motors. Therefore, without lithium, there will be no gigafactory. In fact, this factory alone will need 15,000 tons of lithium carbonate a year. That’s just to get started.
We have started on the a profound competition over batteries as Tesla drives down lithium-ion battery production costs. It is lowering the benchmark and increases cost competition. The response is new entrants to this market like Rivian Motors. Expect as well, competing battery gigafactories.
Tesla’s competitors are making this one of the biggest battles of the century. That’s a battle the entirely depends on lithium supply. Tesla’s biggest rival will likely be Build Your Dreams (BYD), the Chinese automaker backed by Warren Buffet. Already, BYD is building electric buses on American soil and has global gigafactory ambitions. By the end of the year, according to Reuters, BYD will have 10 GWh of battery production capacity. This expects to increase to 34 GWh by 2020 with a new factory in Brazil. Which is about the same capacity as Tesla’s.
Other Tesla rivals rushing to the battery production scene will be iPhone manufacturer Foxconn and LG Chem with the GM brand. Those are the top three battery makers. Although Samsung is also hot on the trail. That’s having just acquired Magna’s battery production division.
Even before Tesla’s gigafactory – and its rivals – entered the picture things were nuts. I mean global lithium consumption had doubled in the decade before 2012. All driven largely by its use in lithium-ion batteries for cell phones and power tools. Then electric cars hit the scene in earnest. Furthermore boosting demand for lithium. So while Tesla’s gigafactory expected to use up as much as 17 percent of the existing lithium supply. All according to Fortune magazine, citing Goldman Sachs.
Some investors are catching on to the lithium battery revolution. The best way to play the game is to look past the traditional lithium producers. In this boom scenario, investors are looking at companies with the lowest market caps, solid management and highly prospective deposits.
So now, lithium is not traded as a commodity. However it is managed through a kind of oligopoly situation. Therefore, there are three or four major suppliers globally. Also they have rather successfully managed supply and demand for lithium. That’s over the past decades. Because of this, everything priced .
As Robinson points out, however, not all lithium is equal. It’s sold in different types for different prices. For instance, lithium carbonate sells for around $6,000 per ton and used to make some of the materials for new battery technology. However, many of the new battery technologies. Particularly those used by Tesla only use lithium hydroxide. That’s the starting material. A material thereby which trades at around $2,000 more per ton than lithium carbonate.
And lithium found in salty water, or brines. Which is by far the most cost-effective.
Furthermore, there are only a few places in the world where lithium is present. Especially at high enough concentrations. Within these salty brines. As well as the most famous in the Atacama Desert. Considered in the “Lithium Triangle” of Bolivia, Argentina and Chile.
However and then supply is threatened by corruption and politics. Which most noteworthy is making it difficult to capitalize on burgeoning demand.
When Tesla’s gigafactory comes online, everyone will be looking for cost-effective lithium sources closer to home. There is lithium in Wyoming I have reported on. However this brings us full circle to the state of Nevada.
Further, the only other brine resources in China. They are much smaller and controlled by Chinese companies.
In conclusion, lithium is increasingly the tech of choice for battery banks across the board. Finally while Tesla’s gigafactory is producing batteries. So winners are emerging in this battery boom. It will be those behind the lithium to think about. Furthermore and those companies especially after the brine.
The Green Living Guy, Seth Leitman is a green living expert, celebrity and Editor of the McGraw-Hill, TAB Green Guru Guides. Seth is also an Author, Radio Host, Reporter, Writer and a Environmental Consultant on green living. The Green Living Guy writes about green living, green lighting, the green guru guides and more. Seth's books range from:
# Build Your Own Electric Vehicle by Bob Brant and Seth Leitman (2nd and 3rd editions)
# Build Your Own Plug-in Hybrid Electric Vehicle by Seth Leitman
# Build Your Own Electric Motorcycle by Carl Vogel
# Green Lighting by Seth Leitman, Brian Clark Howard and Bill Brinsky
# Solar Power For Your Home by David Findley
# Renewable Energies For Your Home by Russel Gehrke
# Do-it-Yourself Home Energy Audits by David Findley
# Build Your Own Small Wind Power System by Brian Clark Howard and Kevin Shea
# and more green living books to follow.