An Emergent Precious Metal: Lithium

An Emergent Precious Metal: Lithium

Introduction

 Lithium is a chemical element with atomic number 3. It is the lightest of the alkali metals is a highly reactive and flammable element. Lithium’s unique chemical makeup makes it the lightest metal and least dense solid element. It has many industrial uses such as: lithium batteries, uses in heat resistance glass and ceramics, alloys in aircrafts and other uses.

Investments in lithium are in growing demand for energy efficiency and technology. The demand for lithium batteries are outgrowing the traditional nickel metal hydride batteries, and other areas like auto mobile and electronics industry. The limited supply of this metal makes it a potential for investments in the marketplace.

Why is lithium useful?

One of the most economical sources of stored energy come from lithium batteries and in today’s society, batteries are used in almost every technological device we use, from wristwatches to cell phones or even cars. Energy is the one of the most important resources for technology growth.

In economics, majority of lithium products would be considered as complementary goods as they are used together with other products for consumption or enjoyment of a final product. As technology grows the demand for these goods and services increase, shifting our demand curve outward. In addition to technology advancing so does the production of lithium as well, increasing our supply curve outward, therefore as the demand and supply curve both increase.

Lithium Products

Lithium is bought in markets in many forms; its largest production is lithium carbonate (Li2CO3) accounting for 90kt LCE which make up roughly 50% of global lithium sales of 2015. The second largest lithium product accounting for 20% of total lithium is lithium hydroxide (LiOH) used for breathing gas purification systems and other uses. Lithium Oxides (Li2O) sold for glass and ceramics take account for 14% of total lithium. The rest of the global lithium is divided up by various lithium compounds like lithium chlorides or butyl-lithium to be sold in industrial markets (Canada Newswire,2016).

Global lithium supply and demand: opportunity for high-quality assets

Energy is the core of modern society. Limited fossil fuel supplies a global desire to reduce its effects such as global warming and city pollution inevitably drives the future society to the use of electric transportation and renewable energy. There is an irresistible need to design storage systems for electrical energy to balance supply with demands and to prevail hybrid electric vehicles or electric vehicles marketplace. Thus, fuel cells and batteries are used in energy storage applications to stockpile energy and restore it as electricity. Among present battery technologies, “Li-ion technology offers the best performing among current battery technologies due to its delivered energy density” (Tarascon & Armand 2001). Long life cycle and the performance of Li-ion technology have seized the portable electronic market previously dominated by Ni–MH technology.

Global battery consumption is Expected to increase 500% over the next 10 years, placing pressure on the battery supply chain & lithium market. Global lithium demand is predicted to increase from 181kt Lithium Carbonate Equivalent (LCE) in 2015 to 535kt LCE by 2025 In this report, we analyze strategic demand drivers (Deutsche Bank, 2015). The remarkable fall in lithium-ion costs over the last five years from US$900/kWh to US$225/kWh has opened up new demand markets and improved the economics of Electric Vehicles and Energy Storage products. Global battery consumption has “increased 80% in two years to 70GWh in 2015, of which EV accounted for 35%(Canada Newswire,2016)”. Global battery demand will reach 210GWh in 2018 and 535GWh by 2025 through Electric Vehicles, Energy Storage & traditional markets. This has major impacts on the global demand of lithium which increased to 184kt LCE in 2015, leading to a market deficit and rapid price increases.

Demand growth over next 10 years; Major Demand Markets

Lithium-ion battery costs are falling quickly as global battery producers are developing manufacturing facilities. Energy cell costs have fallen from US$900/kWh in 2010 to around US$225/kWh today. The reduction in cost is encouraging new demand applications for lithium-ion, making lithium-ion batteries superior to other battery technologies not just on power and performance but also on cost (Desjardins,2015).

The Electric Vehicle

The rise of the Electric Vehicle has increased the global investment in the battery supply (figure 1). In the past few years, the growing market has been initiated by Tesla, however China has had the largest impact. China has a government subsidy program in place for both passenger and commercial EV’s. In 2015, “full-electric EV’s accounted for only 0.6% of global auto sales which is expected to grow to over 16 million vehicles by 2025, rising to 3.0 million vehicles (2.6% of global sales)” (Ayre, 2016). This market share gain should lift lithium consumption in EV’s from 25kt LCE in 2015 to 205kt LCE in 2025.