Why lithium will see another price spike this fall

So far, lithium has been the hottest metal of 2016, beating out gold, with exponential demand expected over the coming years. Although the price trajectory of the metal has been subdued in recent months, the fundamentals behind the long-term trajectory suggest strong potential for long-term growth. Price doubling from 2014-2015 was first seen in China and is now being felt worldwide, with lithium hydroxide prices from $16-20 and carbonate prices from $12,000-14,000 per ton. 

Automotive thrust 

There is no doubt as to the push that Tesla has given the current automotive transition to electric vehicles (EVs). As the company's mission statement outlines, it hopes "to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible." 

However, since 2014, when Tesla first announced the Gigafactory with Panasonic, other manufacturers have begun to take notice and take action. Volkswagen AG announced last week that it was considering LG Chem Ltd. or Panasonic Corp. as partners for several $2 billion factories, according to Bloomberg, with confirmation expected later in the year. 

Previous announcements of billion-dollar investments in battery factories by Volkswagen were largely brushed off by investors as deflections from their "Dieselgate" scandal. But with LG and Panasonic in the picture, concrete plans appear to be crystalizing. 

Combined with Daimler putting $550 million into tripling its battery production capacity in Germany, Nissan's planned investments in the UK for its third generation Leaf, and GM's joint venture with LG Chem to produce batteries in Holland, Michigan, for its Volt and Bolt, it is clear that auto manufactures are beginning to shift to electric—and in a very big way. 

Given this new investment, plug-in electric vehicle (PEV) sales are expected to experience 62% year-over-year Growth in 2016, 60% in 2017, and likely 100% in 2018. This translates into over 600,000 in PEV sales expected in 2018, creating a new level of demand for which the market will need two new lithium mines in operation to even begin to satiate. 

"Looking at the full picture here, the future demand for lithium is truly staggering," says Michael Kobler, CEO and director of American Lithium Corp., one of the ambitious new explorers shaking up the lithium mining scene in Nevada. 

Page 1 of 6
About the Author

James Stafford is the London-based editor of Oilprice.com.