Lithium, the new gold

In a world to be largely powered by lithium, the Alkali metal is likely to become one of the most valuable commodities on the planet.

Background

Lithium is the lightest solid element placed third in the Periodic Table. It is used in the manufacture of a variety of products from medicine to electronics. In the late 20^th century, it became a core component in the manufacture of batteries. The element has high electrode potential.

Lithium is the most-used battery type in electric cars. This has resulted in both its demand and price going northwards. Lithium Carbonate is used as a cathode of a battery. According to CRU consulting, the price for lithium carbonate has more than doubled since 2015.

While Lithium is not a rare element, its market is underdeveloped as compared to other industrial commodities. Chile, Argentina and Bolivia have the largest reserves of Lithium. Chile is the second largest producer. Argentina is 3^rd when it comes to the production and reserves. Australia is currently the number one producer of Lithium. The biggest untapped market is Bolivia. The salt flats in the country is projected to have millions of tonnes of lithium reserves.

Analysis

Sales of electric cars increased to 2 million in 2016. Five years ago, the market was non-existent. The current production of 182,000 tonnes of Lithium is confined to a handful of giants such as Albemarle, Sociedad Química y Minera de Chile, and Ganfeng Lithium. It is expected that the market for the metal will exceed 3.1 million tonnes in the next 20 years.

However, environmental experts are worried. Lithium mining uses large amounts of water and this could also lead to contamination. Additionally, toxic chemicals are used for leaching purposes.  A bigger concern would lie with disposal of the waste. Most of the batteries in the world end up in landfills and the recovery rates are extremely low.

Assessment

Our assessment is that Lithium is likely to play an important role in the future. However, the future will also depend on whether Lithium batteries can store solar power. The concern over environmental issues will remain as most forms of energy leave a toxic footprint.