Is a Lithium Supercycle on Its Way?
Some analysts predict a commodity supercycle driven by lithium is on its way.
A supercycle for a commodity happens when there is a 10-35 year period of rising prices for a commodity due to long-term demand. In the case of lithium, analysts predict increasing demand to power electric vehicles will drive higher prices for the metal.
In fact, it seems the trend has already begun. Bloomberg reports that “starting about two years ago, fears of a lithium shortage almost tripled prices for the metal, to more than $20,000 a ton, in just 10 months.”
An article in the Financial Times quotes Dr. David Deak’s prediction that the lithium market needs to grow from its annual production of 182,000 tonnes in 2017 to an average of 3.1 million tonnes for 20 years to power electric vehicles.
And that’s just the lithium needed to support electric vehicles. Smartphones and other uses of lithium will push the demand further.
Will the mining industry be able to provide lithium in such huge quantities? Well, they are gearing up for the spike, but it seems, at this point, that the demand for lithium is too large to be able to meet supply for the next few years.
For now, lithium production is concentrated in three countries: Australia, Chile, and Argentina. Other lithium producers include China, Zimbabwe, and Portugal.
Miners in the United States (US) are focused on lithium exploration. And the results look promising. Nevada is brimming with lithium potential and is said to emerge as one of the largest sources of lithium in the US.
China will increase lithium output too. The Chinese government recently approved a new lithium extraction method. The process is more eco-friendly and efficient and will speed up the production of lithium.
However, most miners in Nevada are in exploration stage and China’s new extraction method will also take time to set up.
On the other hand, Chile is on a faster track. Sociedad Química y Minera de Chile (SQM) is expanding its production capacity from 48,000 tonnes to 70,000 tonnes. It aims to produce 100,000 tonnes by 2019.
Since the production of lithium will take time to meet the ever-increasing demand, experts expect the undersupply of lithium to push up the price of lithium and attract investor attention. Many predict that early-stage lithium miners will gain major investor attention.