Welcome to Heavy Metals, Proactive's weekly commodities report.
Each week, we pick one commodity and dive in – what’s been happening, where’s it headed, what factors are at play and how are markets responding.
This week we're looking at lithium – and how it's been facing challenges lately, but has promise going forward.
Chances are if you’re reading this on a smartphone, tablet or laptop, there’s a lithium-ion battery powering your device.
While electronics may have been a strong consumer, the boom in electric vehicles (EV) is now fueling much of the demand -- one example being Elon Musk’s Tesla Inc (NASDAQ:TSLA), which has based its entire business on lithium-ion technology.
A critical component in these batteries? Lithium: the soft, silvery-white alkali metal is the lightest metal and the lightest solid element. It exists in a compound form alongside other minerals, usually in igneous rock or in brine pools.
But lithium prices have suffered lately. Lithium carbonate prices peaked in November 2017 at US$25,800 per tonne (t) though since then they have been under pressure. Prices dropped throughout much of 2018 and flattened into 2019. In March 2019, lithium carbonate prices stood around US$11,500/t.
China the heart of the lithium market
China sits at the heart of the lithium market, as a result of its push to build out both electric vehicles and battery-manufacturing capacity.
The spot price in China collapsed over the course of 2018 as the market absorbed a wave of supply, much of it from new hard-rock mines that have come on stream in Australia.
This has halted the run for the key component for batteries used in electric vehicles.
In many analysts and industry watchers views, that the falling spot price is an early correction to the lithium carbonate market in China, that is likely to go through a number of phases of growth over the next decade.
But that's not the full picture.
Look beyond China, however, the price of lithium has continued generally on a flat to upward trend since 2015.
The difference in these numbers is important: it shows the divergence in lithium pricing.
Lack of players
We could be waiting for a while for lithium prices to recover. According to a report by Ademe, the French Environment and Energy Management Agency, lithium supply may not be a serious issue even by 2050. The authors said that only with a 75% penetration of electric vehicles there is a supply risk.
According to the report and echoed by many others across the industry, the primary risk factor for lithium comes from a lack of players in the global lithium industry.
In short, there’s a monopoly held by a handful of countries: Chile, China, Argentina and Australia. Other countries have smaller reserves, including Portugal, Brazil, the US and Zimbabwe.
Long-term demand could help
But analysts say solid long-term demand could improve market conditions. Lithium demand should continue to rise along with wider adoption of electric vehicles, supported by many cities in the world that are banning or punishing petrol or gasoline-engine cars to reduce carbon emissions
In short, it's not an overall question of demand; it's more a question of when that demand kicks in.
In many ways, the future of lithium (and its fortunes) rest on the heels of electric vehicles taking hold.
Neo Lithium (CVE:NLC) Chief Financial Officer Carlos Vicens joined Steve Darling in the Vancouver office of Proactive Investors to provide an update on NEO's Lithium Project in Argentina. Vicens says NEO has upgraded their resource by 227%. He also shared details of their Environmental Base study which is now complete.
Neo Lithium's pre-feasibility study for 3Q mine shows "exceptional" project with strong cash flow and potential to improve resource
Neo Lithium Corp (CVE:NLC) (OTCQX:NTTHF) has unveiled a positive pre-feasibility study for its Tres Quebradas lithium brine project (3Q project) in Argentina, which showed significant cash flows and a US$1.14 billion net present value (NPV).
Millennial Lithium shares up as it posts positive lithium brine pump test results from Pastos Grandes
Contact Katie Lewis at [email protected]
Follow her on Twitter @kelewis