Lithium – Demand Soars Along With Prices

Lithium is the highest demand commodity that is not currently available to traders. Most traders are like children they want what they cannot have. With the significant growth in electric cars and the future projection for demand, lithium has become one of the most sought after metals. More than a decade ago we witnessed the same pent up demand with palladium, which saw its huge growth for use in automobile engines. Global demand for palladium in automobiles will rise nearly 3 percent to a record in 2016 on growing Chinese demand for small cars and as lower oil prices have spurred U.S. sales of light trucks, CPM Group said recently. Automotive use of platinum and palladium is changing, shifting away from platinum toward more palladium and toward non-Platinum Group Metals (PGM) using new technologies. Platinum is used to reduce emissions in diesel-powered engines whereas palladium is used in gasoline-powered engines. The larger the engine, the more platinum or palladium is required to cut emissions.

With a huge shift in the automobile industry to the electric car a new metal is now in demand, Lithium is used to produce batteries that power these huge engines.  For years’ electric vehicles were the favorite of the green crowd, but now the world has accepted these vehicles for general use. Sales have soared with the new Tesla remaining in the headlines day after day.  lithium’s positive story can be put down to the so-called Tesla effect, namely that the rapid growth in electric vehicles will boost demand for the light metal beyond the current level of supply.

Certainly, Tesla Motors has ambitious plans to boost the number of vehicles it produces using lithium-ion batteries, and it’s not the only maker of electric vehicles with rapid growth projections.

The demand for lithium for batteries also makes the metal seem like it’s not a China play, something that can’t be said for most commodities, prices for which are often driven by what’s happening in the largest importer and consumer of natural resources.

Lithium is a very diverse metal, with numerous grades, with numerous applications. Batteries accounted for about 44 percent of lithium demand in 2015, and this is forecast to rise to about 55 percent by 2020, exceeding its uses in areas such as ceramics, glass and pharmaceuticals.

We’re currently tapping into are finite—and that’s what investors can take to the bank.

You may think lithium got too popular too fast. You may suspect electric vehicles are too much buzz and not enough real future. You may, in short, be a lithium skeptic, one of many. And yet, despite this skepticism, lithium demand is rising steadily and sharply, and indications that a shortage may be looming are very real.

Lithium is powering pretty much everything, lithium batteries were made popular by the Energizer bunny but the need for larger batteries the present depends on and our future is being built. It’s a viable alternative to petrol and in consumer electronics market segment alone, there is no sign of contraction—only expansion. Think the Internet of things, or smart houses, or smart cities, eventually. All these fascinating ideas are powered in some way by lithium.

Lithium is the hottest commodity around these days, enjoying spectacular price gains and an outlook that’s the envy of the natural resource sector. There’s just one problem though. It’s extremely difficult, and somewhat risky, to gain exposure to the sector. Lithium isn’t traded on any major exchange, and doesn’t have futures contracts or swaps, thereby cutting out one of the main ways investors gain exposure to a commodity. This means the best way to access lithium’s story is through equities, but this isn’t as straightforward as it may seem.

This isn’t to say that this will not change swiftly, brokers are quickly introducing ETFs and CFD’s for Lithium as well as for miners and others involved in Lithium technology. Lithium prices in China have risen from about $7,000 a ton to over $20,000 recently, according to research by consultants CRU, while industry website Asian Metal says lithium carbonate, the compound used in batteries, has jumped by 76 percent in the past 12 months.