SPIKE

This is what electric cars are doing to the lithium market

Obsession
Batteries
Obsession
Batteries

The electric car market is still small, but manufacturers are ramping up production, and fast; Tesla wants to go from building an estimated 80,000 cars in 2016 to 500,000 by 2018, and are building massive battery “Gigafactories” to make that happen. Some markets have targeted huge rises in ownership, most notably China, which predicts (paywall) there will be five million cars with lithium-based batteries on its roads by 2020.

Lithium, a light, reactive metal found in salt deposits in South America, Australia, and China, is central to the production of lithium-ion batteries. The technology makes smartphones rechargeable and is central to the much larger batteries which power electric cars.

Lithium prices have responded to the growing demand for electric cars:

The hike in price represents a bottleneck, not an ultimate shortage, suggests Benchmark Mineral Intelligence. The London-based consulting firm, produces the BMI Lithium Price Index index, based on data it collects about trading in both lithium carbonate and lithium hydroxide, two of the forms in which the metal is bought and sold. Benchmark see prices likely peaking around 2018 and then beginning to fall back, as more supply reaches the market.

Henk Van Alphen, CEO of Canadian mining company Wealth Minerals, told Quartz he’d bought up lithium mining concessions in Chile on the basis of projected demand from China. “Their projections of growth are unbelievable, because they’re talking about half a million electric cars coming on-stream every year, electric buses, electric trucks,” he said. “The battery business can stand higher lithium prices.”

Now could be the time for would-be miners to jump on unexploited lithium deposits, and for investors to seek them out.

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