Investing in Lithium
Over the past four years, Electric Vehicle sales in the US have grown at a rate of 32%/year. In 2016 total sales amounted to 159k vehicles. Worldwide sales in 2016 grew 41% year over year.
As EVs increasingly become a fixture in the modern world, it is worth taking a look at demand for the raw materials that go into them. The current Tesla Model S battery back is composed of a series of 16 modules. Each module is composed of 444 individual lithium-ion batteries strung together. Lithium-ion is the same type of battery that goes into the Tesla Powerwall, along with many laptop computers and mobile phones. Lithium-ion batteries are lightweight, rechargable, and have high energy density.
Where Does Lithium Come From?
Most of the world’s supply of Lithium comes from a region high in the Andes mountains near the intersection of Chile, Argentina, and Bolivia. Lithium filled brine is extracted from underground sources and then condensed through solar evaporation in large open-air pools.
More recently American and Canadian companies have begun mining for Lithium in the remote Clayton Valley region of Nevada. Albermarle is the most established player and only active mine in North America, but Lithium X Energy Corp and Pure Energy Minerals have recently leased thousands of acres of land with prospective Lithium deposits. The companies are scrambling over the right to supply raw Lithium to the nearby Tesla Gigafactory in Sparks, NV.
Bloomberg ran an informative article on the “Lithium Rush” back in March 2017:
Both Deutsche Bank and Macquarie predict a 60 - 200% increase in demand for Lithium over the next decade, and prices rising by up to 50%. Indeed, the price of Lithium per metric ton has risen from $4,000 in 2014 to over $9,000 in 2017. As demand for Electric Vehicles and battery storage increases, suppliers are scrambling to keep pace with demand.
-Instructor at How Markets Work