Lithium is the new Oil and is in an undisputed bull market
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South America Lithium is the new Oil
Demand for more efficient energy storage is an ongoing structural thematic will continue through the next decade. Lithium-ion batteries for consumer electronics, Electrical Vehicles (EV) and Electrical Energy Storage systems, will see Lithium demand grow at >10% cagr through to the end of the decade to 300ktpa+. The major demand swing factor is from EV for whom the outlook continues to brighten. This is evidenced by the major car manufacturer’s commitment to rolling out EV and by the multi-billion dollar investment in Lithium-ion battery mega-factories by Tesla, Warren Buffett’s BYD and others. Global average Lithium Carbonate contract prices have risen YoY to US$6,000/t+ and more recently the domestic spot prices in China have risen to ~US$14,000/t due to changing industry supply dynamics.
Undersupplied lithium markets should persist over the medium-term given the inability for any significant supply side response globally. Security of timely, stable, large-scale Lithium supply is a growing issue for end users across the globe.
Global average Lithium Carbonate contract prices have risen to US$6,000/t+ and more recently the domestic spot prices in China have risen to ~US$14,000/t due to changing industry supply dynamics. Most of the world’s Spodumene (a hard rock mineral) supply is coming from Greenbushes in WA. Its new Chinese (Tianqi Lithium) and US (Albemarle – acquirer of Rockwood) owners are now predominantly supplying their own downstream operations leading to restricted third party sales and a considerably tighter market.
Whilst these domestic conditions are not (yet) indicative levels for main contract (global-average) prices, this nevertheless bodes well for the global market at large. As long as the market outside of China (namely Japanese and Korean cathode producers) depends almost exclusively on Chinese converters (converting mineral concentrates to Lithium chemicals), price risk remains to the upside.
We would not be surprised to see medium-term Lithium Carbonate contract prices at US$9,000/t+ on a global average basis.
Undersupplied lithium markets should persist over the medium-term given the inability for any significant supply side response globally and the usual resource project development challenges. (We see ~100ktpa / only 5 genuine projects on a global basis that will be required to enter the market). Security of timely, stable, large-scale Lithium supply is a growing issue for end users across the globe.
Australia and Chile are by far the largest current producers of lithium. Australia, China and Chile are the top three reserves holders, dwarfing the rest of the world’s reserves. Argentina rounds out the top four, with a respectable reserves figure of almost 1 million tons. No other country comes close to these four in terms of reserves. The picture is a little different in looking at resources, with Bolivia and China leading the pack.
We get a very different picture of reserves from sources other than USGS. For example, the 2013 Fox Market Report cites the signumBOX 2011 reserves estimates for its chart, which shows the percentage allocation of reserves around the world. It’s not clear why Bolivia is omitted from the USGS reserves analysis, but based on the signumBOX report and various other analyses, we should consider Bolivia to be a major player in the future lithium market. Politically this has huge ramifications with only one of the major producers being friendly to the current but declining Super Power, United States.
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