“I’m so happy, ‘cause today I’ve found my friends…”
So goes the first line of “Lithium”, which fans of 90s rock recognize as a famous song by the legendary rock group Nirvana. Its first line seems to describe the mood of lithium investors these days, as 2016 has seen the astonishing rise in lithium prices. Its steep price increases have market experts calling lithium the hottest commodity in the market today, and probably for some time to come.
What is Lithium?
Lithium is a silver mineral known as the lightest and least dense of metals. Trace amounts of it can be found in every living organism, but scientists so far haven’t figured out what biological function it serves. Plants and animals can survive in good health without it.
It first came into worldwide prominence as a drug for bipolar disorders back in the 90s, which is why Nirvana used it as a title for their song in the first place. But it can be used for so many products as well. It’s used to make organic compounds called butyllithium. Lithium fluoride is used for aluminum smelting. Lithium carbonate, lithium sulfate, and lithium hydroxide are used as additives for cement-based adhesives. Lithium stearate is the main component of industrial grease called lithium soaps.
Lithium and Modern Use
But for many people today who use mobile devices, they’re the component used in rechargeable lithium-ion batteries. It may not have a biological function, but it’s one of the most crucial minerals in modern society. These Li-ion batteries now power smartphones and tablets, and there are so many of these mobile devices that in 2014 it was reported that there were more mobile gadgets than there were people in the world. At the time, there were already 7.2 billion of these things. The increase in the number of gadgets is actually 5 times the increase of humans on the planet.
And then we have the new electric vehicles. At first these cars were gimmicks, and they weren’t really all that popular. But the newcomer Tesla car company changed all that, and now it the Tesla brand is one of the most popular and prestigious car badges in the world. It proved that electric vehicles can be fast, comfortable, and very practical.
Tesla now has 325,000 reservations for its new Model 3 car, and that has the company scrambling to ramp up its EV battery production. These electric vehicles are powered by batteries made with lithium, and so the demand for the mineral is even greater.
Don’t forget that Tesla isn’t the only EV car company on the horizon. Google and Apple, the giants of the computer and electronics industry, have also announced that they too will be entering the EV industry by the start of the 2020s.
The Increasing Demand for Lithium
The increasing demand for lithium is also raising the price for the mineral in the open market. That’s compounded by the fact that the market isn’t really all that open. About 85% of the world’s supply of lithium is controlled by just 4 companies. You have FMC Corp and Albemarle Corp in the US, SQM from Chile, and Talison in Australia.
That there is such a stranglehold over the world’s supply of lithium is a problem for car companies like Tesla. The car company has announced that they’re amping their yearly production to 500,000 cars a year by the end of 2018, which is 2 years ahead of their former schedule. To reach that sales target, the company needs 27,000 tons of lithium carbonate. To put that in perspective, such an amount is equal to the global consumption of lithium in 2015.
It’s for that reason Tesla is now trying to make a deal with new producers of lithium. Investors are pouring money into new lithium companies, as the market for lithium explodes.
Rising Prices: Now and in the Near Future
Because of the high demand and the stranglehold on the supply, anyone with an elementary knowledge of economics knows that the price of lithium is bound to increase. Lithium carbonate sold at about $6,000 per ton back in 2011. It increased to $7,000 a ton near the end of 2013.
In China, the demand was so high that in March of 2016, the price was $18,000 per ton. The latest report from research house CRU is that on the Chinese spot market, the price for battery grade lithium carbonate is now more than $20,000 per ton as of June 3.
Experts still can’t see an end to the boom, and thus they predict that the price will still go up. Citigroup projects that the worldwide demand for lithium will rise by 65% over the next five years. It’s projected by Global advisory firm Global Lithium LLC that the demand will actually quadruple over the next decade.
It’s not just the increase in the popularity of electric vehicles that’s driving the demand and hence the price. The sales of smartphones and tablets are also still rising. In 2014 there were 1.9 billion smartphone sales, but experts project that sales will still rise to 2.3 billion in 2019.
Lithium is truly hot in the commodities market right now, and that’s not about to change for some time to come.