They search the globe for great investments with a focus on trending and emerging themes. The current focus is on electric vehicles, the EV metals supply chain, stationary energy storage and AI. Lithium is vital because of its indispensability in modern green technologies, especially advanced batteries. Countries in the developing world have been able to tap into vital new revenue streams even as the price of lithium was pushed downwards. Fears over another crash, current capital losses, and a lack of production increase even when input prices are at rock bottom may stymie efforts to increase lithium production for years.
Commodities fluctuate all the time, and over-investment in production is hardly a unique story. What separates lithium, and what makes this situation so dangerous, is the intense geopolitical competition lithium is subject to, the regulatory environment lithium interfaces with, and lithium’s role in combating climate change. The irony is that we are near the beginning of an EV metals supercycle where demand for EV metals will potentially skyrocket over the next decade, assuming we continue to move towards electrification of global vehicles. The metal is found in trace amounts in many rocks and mineral water but is more abundant in minerals such as petalite, spodumene, lepidolite, and amblygonite. In one year, the cost of lithium has dropped a staggering 80%.
INDUSTRIAL METALS
It is known as a soft substance with the lowest density of all metals (0.534 g/cm3). Investors can draw their own conclusions on what scenario (base case or high case demand) will likely play out. In 2022 we saw what happens when EV demand surges and in 2023 we saw what happens when supply surges.
In the 1790s, Jozé Bonifácio de Andralda e Silva from Brazil discovered petalite on Utö, a Swedish island. This was the first lithium mineral to be found but it wasn’t until 1817 that lithium was identified as a new metal in its own right. Our responsive widgets and charts scale to nearly any display size.
It should also be noted that February 2024 China EV sales YoY growth will potentially be terrible, given Chinese New Year is in February this year compared to January in 2023. This alone might delay a lithium price bottom for a couple of months which ties in with some analysts’ views that the bottom will occur late Q1, 2024 or in Q2, 2024. The chart below shows what happened https://www.topforexnews.org/ to iron ore when China accelerated their industrialization and urbanization. We expect orders to start flowing upstream again either towards the end of the first quarter or early in the second quarter. Furthermore Chinese non-integrated lepidolite and spodumene (from Xinjiang) is almost unprofitable, with Chinese brine (from Tibet) also getting close to being unprofitable.
Metal Price Fixings?
The China lithium carbonate spot price has been stabilizing since December 7, 2023 and this past 2 weeks has bounced higher from CNY 95,500 to CNY 97,500. This price crash should remind everyone that green energy is just as susceptible to market forces as its competitors in the fossil fuels industry. On balance, this is https://www.forexbox.info/ an overwhelmingly positive thing, as the maturation of green energy has made solar electricity cheaper than coal and created large, moneyed constituencies interested in the success of green energy. Besides being used extensively in the medical and psychiatric fields, lithium also offers vast applications in other areas.
- Lithium demand is mostly driven by EV adoption and to a lesser degree energy stationary storage («ESS») adoption.
- Besides being used extensively in the medical and psychiatric fields, lithium also offers vast applications in other areas.
- They search the globe for great investments with a focus on trending and emerging themes.
Unfortunately for all, this vision has been interrupted by some of the perennial enemies of the orderly market – human greed and poor planning. Just over a year ago, lithium prices were sitting at nearly $80,000 a ton in December 2022. The U.S. government was so worried about the metal’s price and its impact on advanced https://www.day-trading.info/ technologies it enacted a comprehensive supply review. EV makers, including Tesla TSLA , were scrambling to buttress their own lithium supplies. Lithium sellers such as Ganfeng Lithium, the Albemarle Corporation, and others were so swamped with orders they were holding auctions, which routinely pushed prices upward.
While theoretically, EV makers can produce more vehicles with dropping battery prices, demand for EVs has slowed as leaders such as Tesla try to produce vehicles for the mass market. Previously, the market appealed to luxury buyers and early adopters, creating significant growth. Lithium supply is driven by current producers expanding and new projects coming online. This is also dependent upon lithium prices being high enough to incentivize (and hence finance) expansion and new production. At current lithium prices there is minimal incentive for many new projects.
Fast forward to today (Feb. 19, 2024) and the China lithium carbonate spot price is at CNY 97,500/t (~US$13,719/t) (red line drawn by the author). This now means that most Chinese non-integrated spodumene and low grade integrated lepidolite production is now very unprofitable. The September 2023 chart below from Macquarie shows the various Chinese lithium producers cost of production.
Lithium prices are well below the marginal cost of production in China
Johan August Arfvedson of Stockholm analysed the mineral when he realized it contained an unknown metal that was a new alkali and a version of sodium. The metal’s name is derived from the Greek word «lithos» meaning stone. Lithium is a silvery-white metal that resembles aluminium or platinum. On the periodic table, it belongs to Group 1 (Ia) which holds the other alkali metals hydrogen (H), sodium (Na), rubidium (Rb) potassium (K), cesium (Cs), and francium (Fr).
The metal plays an essential role in the creation of lithium-ion batteries, especially for laptops, mobile phones, electric vehicles, and pacemakers. Lithium is also used to create alloys with magnesium and aluminium which are then deployed in armour plating, aircraft and trains. Tesla decreased their prices in some cases by 30% this year, yet it hasn’t seemed to be enough to increase demand. Assuming we move to a 100% EV world the demand surge for EV metals will be virtually unprecedented in history. H2, 2025 may see the next surge in EV sales as cheaper EVs become available in the West from BYD, Tesla and others which may lead to the next lithium price surge.
Once lithium is cut and exposed, it develops a black oxide layer. Lithium is the only metal that reacts at room temperature with nitrogen. When burning, lithium has a crimson flame that turns white when the fire turns more vigorous. It has a melting point of 180.50°C (356.90°F) and a boiling point of 1342°C (2448°F). A degree of stability is necessary in order to rescue the lithium market. Prices of lithium need to be low enough that consumers, such as battery manufacturers, can make a profit, but high enough to encourage suppliers towards long-term expansion and investment.
Lithium is traded as both Lithium Hydroxide and Lithium Carbonate. Lithium demand is mostly driven by EV adoption and to a lesser degree energy stationary storage («ESS») adoption. The chart below forecasts that if EV adoption and ESS surges (top line) we will get large lithium deficits again this next decade. Assuming we move to a 100% EV world the two charts below summarizes the massive demand surge for key EV metals. Note that lithium (35x) and then flake graphite (17x) have by far the two biggest demand pulls. Lithium is earning its current moniker, “white gold,” and all the geopolitical contention that comes with it.
