We’re more than halfway through 2017, which means it’s time to start forecasting what could be in store for 2018…
And there are a few commodities that we like to keep our eyes on so we can stay ahead and remain prepared for the future.
One of those commodities is lithium.
You’ve probably been hearing a lot of hype about lithium’s supply and demand. And it’s because lithium’s growth keeps rising year after year.
A big and continuing factor that’s driving the demand for lithium is electric vehicles (EVs), which is probably no surprise.
Governments continue to push forward with establishing new legislation in favor of EVs. EVs are the future of the automobile industry because governments and individual consumers are realizing the significance their carbon footprints have on the environment and how one huge way to reduce those footprints is to shift from gasoline-powered vehicles to electric cars.
For example, Germany has mandated that all new cars are going to need to be emission free by 2030. And Norway wants to pass legislation to ban sales of gasoline-powered cars by 2025.
Swiss bank UBS recently raised its forecast for penetration of EVs by more than 50%, estimating that EVs will hit 14% penetration globally by 2025.
Additionally, Morgan Stanley analysts have projected the production and use of electric cars could rise to 2.9% of 99 million new vehicles in 2020 and to 9.4% of 102 million new vehicles in 2025, from 1.1% of 86.5 million this year.
A UBS analyst said this about lithium’s forecast:
While all battery materials are abundant, mining and refining capacity could represent a bottle neck when EV demand takes off, even if only temporary.
A leader in the production of EVs has been auto manufacturer Tesla (NASDAQ: TSLA). And its CEO, Elon Musk, can’t help but bring attention to the company with his ambitious goals.
And that attention has resulted in molding the EV into something that’s highly desirable to consumers and in ultimately creating a higher demand. Musk has created a product that’s intrigued the public, giving them more reasons to purchase EVs than for just their potential environmental benefits.
It’s said Tesla will reach total production by 2018 — producing more lithium-ion batteries than what were produced worldwide in 2013.
As always, a strong driving force behind lithium is the increasing lithium consumption. Electric vehicles need lithium in order to create their lithium-ion batteries, which are the power sources for the cars.
According to Statista, in 2018, the total supply of lithium is expected to total 284,839 metric tons of lithium carbonate equivalent (LCE).
There are a few companies that’ll dominate over the next five years because of the demand for lithium carbonate supply.
According to Robert Baylis, Roskill managing director, FMC Corporation (NYSE: FMC), Albemarle (NYSE: ALB), Sociedad Química y Minera de Chile (NYSE: SQM), and China’s Tianqi Lithium Corporation made up 66% of the world’s LCE last year.
In 2017, FMC’s lithium hydroxide capacity rose 80% to 18,000 tonnes a year, and it plans to boost that number to 30,000 tonnes by the end of 2019.
There’s no hiding that lithium’s demand is on the rise and will continue throughout 2018. On the other hand, though lithium supply is steadily increasing, it is still behind its demand. But there is a possibility of this changing, and we could see some oversupply around late-2018 and into 2019.
Either way, lithium will most likely experience the same trends that it has in 2017. And by the end of 2018, we could start to see a shift…
Until next time,
Jennifer Clark
Pro Trader Today