Lithium has some substitution risk from sodium-ion batteries (low end EVs & energy stationary storage (~10% of demand could be taken by sodium-ion) and flake graphite from artificial graphite. Substitution may potentially cause the demand numbers below to be a bit lower. Lithium can rarely be obtained by investors in its physical form but the metal can be traded effectively in other ways. One can buy shares in companies that are involved with lithium mining and production.

The metal plays an essential role in the creation of lithium-ion batteries, especially for laptops, mobile phones, electric vehicles, and pacemakers. Lithium is also used to create alloys with magnesium and aluminium which are then deployed in armour plating, aircraft and trains. Tesla decreased their prices in some cases by 30% this year, yet it hasn’t seemed to be enough to increase demand. Assuming we move to a 100% EV world the demand surge for EV metals will be virtually unprecedented in history. H2, 2025 may see the next surge in EV sales as cheaper EVs become available in the West from BYD, Tesla and others which may lead to the next lithium price surge.

Just last week BYD launched the Dolphin Mini (Seagul) in South America starting from US$20,100. In 2022 we saw most EV metals prices surge higher, as EV demand soared (107% in 2021 and 56% in 2022). Then in 2023 https://www.dowjonesanalysis.com/ we saw prices collapse as demand slowed (EVs grew ~30% YoY in 2023), supply surged, and excess inventory was wound down. Of course the EV metals sector is new and very vulnerable to swings in supply and demand.

Lithium Price Chart

Lithium is traded as both Lithium Hydroxide and Lithium Carbonate. Lithium demand is mostly driven by EV adoption and to a lesser degree energy stationary storage (“ESS”) adoption. The chart below forecasts that if EV adoption and ESS surges (top line) we will get large lithium deficits again this next decade. Assuming we move to a 100% EV world the two charts below summarizes the massive demand surge for key EV metals. Note that lithium (35x) and then flake graphite (17x) have by far the two biggest demand pulls. Lithium is earning its current moniker, “white gold,” and all the geopolitical contention that comes with it.

As the chart shows, CAM manufacturers have been destocking at a fast pace, once battery inventories return to normal level then orders should start to flow upstream again… The commodity remains extremely valuable due to its essential roles in the fields of medicine, technology, and to investors looking to add a sought-after commodity to their portfolio. Two of the world’s major lithium producers are Australia and Chile. China and Argentina also produce the metal to a lesser degree.

In Australia, lithium comes from mining ores of other minerals. Chile and Argentina extract lithium from the brine of underwater lakes. The water is brought to the surface and allowed to evaporate. The remaining saline solution is processed to extract the lithium, usually by electrolysis. Lithium has a silvery veneer and is a soft and malleable metal. It has a potent reaction to water and with air, it rapidly oxidizes after being cut.

China spot lithium carbonate prices have this week bounced only very slightly from the bottom of CNY 95,500 to CNY 97,500

One of the main forecasts that investors rely on to predict the market price is the current global demand and supply chain. In particular, the price is driven by the demand for two forms of the metal – lithium carbonate and lithium hydroxide. Another factor that affects lithium prices is the rarity of the metal. The London Metal Exchange https://www.forex-world.net/ (LME) works closely with the lithium industry to provide more information, forecasts, charts, and lithium prices to investors. Market prices for lithium have fluctuated dramatically over the past few years as investors have speculated over the supply and demand for lithium in the growing market for electric vehicle batteries.

When Argentina’s new libertarian president, Javier Milei, announced sweeping reforms, a prominent one was making it easier to export lithium. The U.S. subsequently announced financial support to make that happen. When Namibia conflicted with a Chinese mining company, it was over the export of lithium. After the fall of Kabul to the Taliban, one of the few economic opportunities that emerged was for the export of lithium from the Taliban-ruled Emirate. It does look like we may have hit the bottom, or at least we are very near.

1. Lithium can rarely be obtained by investors in its physical form but the metal can be traded effectively in other ways.
2. Symptoms include nausea, tremors, fatigue, dizziness, heart rhythm and thyroid issues, muscle weakness, rashes and confusion.
3. The current focus is on electric vehicles, the EV metals supply chain, stationary energy storage and AI.
4. Countries in the developing world have been able to tap into vital new revenue streams even as the price of lithium was pushed downwards.
5. It is known as a soft substance with the lowest density of all metals (0.534 g/cm3).
6. Two of the world’s major lithium producers are Australia and Chile.

Commodities fluctuate all the time, and over-investment in production is hardly a unique story. What separates lithium, and what makes this situation so dangerous, is the intense geopolitical competition lithium is subject to, the regulatory environment lithium interfaces with, and lithium’s role in combating climate change. The irony is that we are near the beginning of an EV metals supercycle where demand for EV metals will potentially skyrocket over the next decade, assuming we continue to move towards electrification of global vehicles. The metal is found in trace amounts in many rocks and mineral water but is more abundant in minerals such as petalite, spodumene, lepidolite, and amblygonite. In one year, the cost of lithium has dropped a staggering 80%.

Once lithium is cut and exposed, it develops a black oxide layer. Lithium is the only metal that reacts at room temperature with nitrogen. When burning, lithium has a crimson flame that turns white when the fire turns more vigorous. It has a melting point of 180.50°C (356.90°F) and a boiling point of 1342°C (2448°F). A degree of stability is necessary in order to rescue the lithium market. Prices of lithium need to be low enough that consumers, such as battery manufacturers, can make a profit, but high enough to encourage suppliers towards long-term expansion and investment.

Market Trading

Back in September 2023 the lithium carbonate spot price was at ~US$21,000/t (blue-dotted line), a price where the Chinese non-integrated spodumene producers were starting to become unprofitable. Lithium is mainly used for energy storage such as batteries for electric vehicles and sustainable energy generation. The price of Lithium is expected to rise substantially in coming years as the world moves further towards using green energy and lower carbon industry. https://www.investorynews.com/ China lithium carbonate spot prices have fallen ~82% from their 2022 high and are now well below the marginal cost of production. This is resulting in severe cost cutting and several mines going into care and maintenance, which over time reduces supply. The Trend Investing group includes qualified financial personnel with a Graduate Diploma in Applied Finance and Investment and well over 20 years of professional experience in financial markets.

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Pregnant women are advised to avoid this substance as it might lead to birth defects. Lithium has a host of side effects when consumed by a sensitive individual or in too large quantities. Symptoms include nausea, tremors, fatigue, dizziness, heart rhythm and thyroid issues, muscle weakness, rashes and confusion. From early on, lithium was used in the medical world as a treatment for physical and psychiatric conditions. In the mid-1800’s it was unsuccessfully used to remedy gout and uric acid calculi. In the late 1800s, it was used to treat mania with such positive results that lithium is still used in psychiatry today.

While theoretically, EV makers can produce more vehicles with dropping battery prices, demand for EVs has slowed as leaders such as Tesla try to produce vehicles for the mass market. Previously, the market appealed to luxury buyers and early adopters, creating significant growth. Lithium supply is driven by current producers expanding and new projects coming online. This is also dependent upon lithium prices being high enough to incentivize (and hence finance) expansion and new production. At current lithium prices there is minimal incentive for many new projects.

Fast forward to today (Feb. 19, 2024) and the China lithium carbonate spot price is at CNY 97,500/t (~US$13,719/t) (red line drawn by the author). This now means that most Chinese non-integrated spodumene and low grade integrated lepidolite production is now very unprofitable. The September 2023 chart below from Macquarie shows the various Chinese lithium producers cost of production.