Bit of a long read but shows the future potential of lithium..well worth the read imo..
From cars to homes to everything you can imagine having inside that home, the power of lithium will be as universal as plastics became in the 20th century.
Tesla GigaFactory Gigantic by any standard, this massive production facility is destined to double the world's lithium-ion power storage capacity single-handedly and could raise global demand for the metal by as much as 17%, according to Forbes.
However, despite this factory's enormous production potential, demand is still outstripping supply.
Just a week after announcing that Powerwall units were available for pre-order, Elon Musk, founder and CEO of the company, went public saying that the Gigafactory's entire production capacity, based on Powerwall demand alone, was already spoken for.
Initially, more than half of the as-of-yet uncompleted factory's production capacity was supposed to be committed to making batteries for Tesla's main product: its line of electric cars.
So if the demand for residential energy storage was a shock to the founder of the company, just imagine how much of a shock it will be for the rest of the industry.
From cars to homes to everything you can imagine having inside that home, the power of lithium will be as universal as plastics became in the 20th century.
But here's where the opportunity comes in... As much as demand for lithium is growing, lithium production, especially in North America, is seriously lagging behind.
As it stands, three companies currently control about 90% of the world's lithium supply: the Chile-based Sociedad Quimica y Minera (NYSE: SQM), American FMC Lithium (NYSE: FMC), and Albemarle (NYSE: ALB), which recently acquired competitor Rockwood (NYSE: ROC).
However, this cartel will not keep its near-monopoly for long.
The Chinese, for example, are striving to expand production as rapidly as possible. Their goal for 2015 was to grow production by more than 30,000 tons (from over just 5,000 in 2014). It's still not clear whether they were able to do so.
The Russians are doing the same, re-entering the lithium field after a long hiatus.
Australia and Chile still lead the pack, however, posting production numbers of about 13,000 tons each in 2014 — almost three times that of the Chinese, who came in third.
Overall, with annual lithium demand moving steadily north of total current global production rates, it's clear that even by the most conservative estimates, our ability to produce lithium comes nowhere near our thirst for it.
By mid-century, total lithium demand will be about 10 times current production — making this one of the most visible emerging trends ever seen.
Where's There's Demand... There Will Be Supply
This presents an interesting problem and an even more interesting opportunity.
Like I said before, lithium mining in North America is very limited.
However, with the world's single-biggest lithium consumer, Tesla, placing its factory outside of Sparks, Nevada, the demand for new lithium and increased investment in exploration and production has never been higher.
I mentioned earlier the three biggest names in the business right now: Sociedad Quimica y Minera (NYSE: SQM), FMC Lithium (NYSE: FMC), and Albemarle (NYSE: ALB).
However stable large operations of this size might be (SQM is the smallest at $4.8 billion), the diversity of these companies' interests dilutes the effect that the trend for lithium demand itself might have.
ALB, formerly ROC, accounts for 20%; FMC is also at 20%, and SQM accounts for 7%.
The ETF currently has 58% of its assets in lithium mining and processing companies, with the remainder in the battery makers.
Panasonic is the fourth-largest holding with an allocation of 6%.
Lithium is the Metal of Today and Tomorrow
With statistics and a list of mainstream, product-hungry applications like this, comparing lithium to oil of the early 20th century may indeed be understating its importance to the future of high-volume consumer technology.
Never before has a single element been so crucial to so many life accessories — even basic materials such as plastics, although incredibly useful, have never been singularly vital in the creation and maintenance of such a wide variety of technologies.
Lithium is definitely not the only answer to the problem of portable energy storage, nor will it be the last.
It is, however, currently the one that's been chosen by industry leaders — meaning its future is bright.
On a mid- to long-term time horizon, the prognosis for the big producers and ETFs is highly favorable.
For some of the smaller explorers and miners, however, the windfall could be nothing short of spectacular.
CAD Price at posting:
0.4¢ Sentiment: Buy Disclosure: Held
(20min delay)