THE WHITE GOLD RUSH – MY LOVE FOR LITHIUM
Written by Mike Cosgrove (Kent Point) Lithium is a commodity that can be extracted from the earth and was discovered exactly 200 years ago by a chap named Johan Arfvedson from Sweden. Lithium is classified as an element and as we know it can be used in batteries for electric devices, smartphones and many other products that require battery power. It has recently witnessed growing attention and an increase in demand and this can be related to many areas but the main contributor has been the increasing production of electric cars. Lithium can also be used in many sectors and industries including ceramics/glass, air treatment, lubricating greases to even rubber and pharmaceuticals. New products coming onto the market also require the use of lithium and these are drones, mapping technology, construction equipment, aerospace equipment and many other new products. This new demand combined with a global shift into the new technology age is attracting investments and interest into the market. It is without a doubt that the single most valuable commodity of our tech-driven future is lithium. Commercialization of the Lithium-ion battery occurred in 1991 by Sony and this turned lithium into a valuable commodity that was in big demand. Currently at present in 2017 lithium is now used in just about all of the mobile electronic devices on the market. I look at lithium’s position in the future through its dependency. The tech future we are residing over will merge into the current digital ecosystem of devices that provide us many different services and uses. On a smartphone alone we can run certain health tests, learn a new subject, ring another country, book a flight, order food, read a book and even pay a bill. This can all be done on a smartphone and a lithium battery is required to power that smartphone. We all know the frustration that can occur when our phone battery dies, it restricts us from doing the things we are dependent on through the platform of a smartphone. So it disconnects and isolates us from the digital ecosystem and this puts the lithium battery in a great position of dependency. This dependency is spreading over into industries that are currently absorbing the digital age and these are electric cars, mobility equipment, drones, healthcare equipment and even construction tools. A builder requires a battery in order to use his drill to work, a mobility scooter requires a battery in order to move and an electric car requires a battery in order to travel. This why lithium sells me because its dependency is vital and the world moving into a tech-driven future means more and more people are inheriting this dependency. This paper looks into the main fundamentals of the lithium market, the trend, products and the companies placed to potentially profit from this growing demand.
LITHIUM FACTS AND THE END-MARKET BREAKDOWN
Discovered in 1817
Lithium is an alkali metal
Atomic number 3
The rock looking metal has a silvery color
The name comes from the Greek word ‘lithos’ which means ‘stone’
Lithium melts at 180.50 degrees Celsius and boils at 1342 degrees Celsius
It is believed that lithium was one of the three elements that was produced in the big bang
Can act as a coolant in nuclear reactors
Lithium can be used as a mood-stabilizing drug
Lithium has revolutionized many industries from computers to phones to construction drills and even drones
Lithium was used in the NASA mars exploration rover vehicles
END-MARKET BREAKDOWN (The industries that use lithium) Ceramics/glass – 35% Batteries – 31% Lubricating greases – 8% Metallurgical powders – 6% Air treatment – 5% Polymer – 5% Aluminum – 1% Other – 9% As we can see above, the end-market breakdown for lithium is diverse but mainly crowded by the ceramics/glass and battery industry that equates for 66% of the lithium end-market.
THE GLOBAL CONSUMPTION OF LITHIUM SOURCE: Statista
2009 – 101,613 metric tons 2010 – 125,726 metric tons >>> 23.70% growth on year 2011 – 138,306 metric tons >>> 10% growth on year 2012 – 151,048 metric tons >>> 9.21% growth on year 2013 – 165,484 metric tons >>> 9.56% growth on year 2014 – 182,903 metric tons >>> 10.52% growth on year
The table above shows the consumption of lithium in metric tons from 2009 to 2014. The consumption grew by 79.9% over those 6 years and the median average growth year on year was 12.59%. This increase in growth and demand was fuelled by the mass production of the smartphone and an increase in demand from the ceramics and glass industry. Below is a table that correlates the knock-on effect from an increase in the demand for lithium batteries. Every ten percent increase in the demand for lithium batteries creates a 3.1% increase for the whole lithium market considering all the other end-market participants’ performances stay flat. This tells me that the value lays in the companies mining and producing lithium and companies that have large inventories of lithium. The main reserves can be seen in Argentina, Australia and Chile. These countries produced around 28,900 metric tons in 2015 and have an estimated 11 million metric tons in reserve. The lithium data coming out of the USA can be a bit blurred and one tends to feel Tesla’s Gigafactory could be a suspect in that, time will sure tell.
Battery Demand Increase 10% 20% 50% 100% 200% 300% 400% 500% 1,000%
Possible Increase in Global Consumption 3.1% 6.2% 15.5% 31% 62% 93% 124% 155% 310%
Possible Extra Demand for Lithium (METRIC TONS) 5,669 11,334 28,349 56,699 113,398 170,097 226,796 283,495 566,990
ELECTRIC VEHICLES (EV) Below I have added a forecast for lithium demand and electric vehicles that was produced by Roskill. The forecast for lithium battery vehicle sales is set to grow nearly 400% from 2012 to 2020, a major increase and this is just the sales for the lithium battery that goes into the electric vehicles.
Below is a forecast by UBS bank on global Electric Vehicle sales.
TRENDS AND NEW MARKET CONTRIBUTORS Here is a list of growing industries and new products that have recently come on the market and have a potential to grow in sales and in return that will fuel the demand for lithium even more. The case that these products will potentially see the same growth that electric vehicles could see is a case yet to argue but one thing for sure is that they will all contribute to the demand of lithium. What kind of contribution that may be is yet to be witnessed.
Robotic devices E-Bikes Electric buses Military drones Drones (Surveillance & security, distribution and media) Construction equipment and mobile DIY tools New mobile healthcare devices Aerospace equipment Nuclear industry New home appliances and devices Electronic agriculture equipment Smart devices
Another industry that is contributing towards the demand for lithium is ceramics and glass. Lithium helps glass ceramics become more protected from thermal shock and lithium metaborate powder also helps produce thin glass sheets when melted at a certain temperature. Lithium aluminosilicate glass is another glass product that can formed by lithium. Lithium can also be used for the treatment of certain mental illnesses. It can be used as a mood-stabilizing drug and it can also treat bi-polar disorder. There are many products and industries that require the use of lithium and these industries and products are very diverse. The single main contributors to the lithium market will be the technology industry and electric vehicles. Many new devices and products will come onto the market and the customer requirement for mobility will push these products into using lithium batteries. 20 years ago we did not predict smartphones, electric cars and drones would be a major force in society today yet they are. A lot of devices we currently use will also evolve into using lithium just like drills and phones evolved into mobile devices rather than devices plugged into electric sockets. Deep sea exploration equipment, diverse drone devices and even space exploration devices are all in demand for lithium and lithium was even used to power the NASA mars exploration rovers. A commodity that was discovered on earth can used as a product to power a device so us earthlings can explore the planet Mars, amazing. These are just some of the
reasons why lithium will become one of the most dependent commodities in our tech-driven future. THE PLAYERS AND FINANCIALS Currently there is only one ETF (exchange traded fund) that offers investors exposure to the whole lithium market. Its ticker code is LIT and the ETF is listed on the NYSE, the fund name is Global X Lithium. The fund has seen new inflows of capital recently because a small amount of investors are scrambling to jump onto the lithium trend and I personally believe other ETFs will come onto the market in the future. I have listed below all the lithium companies that LIT invest into and I have also added a few extra companies that I feel are very good holdings to have. I have also built a virtual portfolio to track the lithium market and its financial performance and effect.
FMC CORP QUIMICIA & MINERA DE CHILE ENERSYS TESLA MOTORS INC SAMSUNG SDI CO ltd ALBEMARLE CORP LG CHEM ltd PANASONIC CORP GS YUASA CORP SIMPLO TECHNOLOGY CO ltd GALAXY RESOURCES ltd OROCOBRE FDG ELECTRIC VEHICLES ltd PILBARA MINERALS ltd NEMASKA LITHIUM ltd L&F CO ltd DYNAPACK INTERNATIONAL LITHIUM AMERICAS CORP ADVANCED LITHIUM ELECTRONICS VITZROCELL CO ltd COSLIGHT TECHNOLOGY INTERNATIONAL BACANORA MINERALS ltd CHANGS ASCENDING ENTERPRISE ULTRALIFE CORP BLUE SOLUTIONS CHINA BAK BATTERY INC
COMPANIES NOT INCLUDED IN GLOBAL LITHIUM X
YASUNAGA CORPORATION RB ENERGY otc market TIANQI LITHIUM INDUSTRIES LITHIUM X ENERGY CORP PURE ENERGY MINERALS ltd JIANGXI GANFENG LITHIUM ltd
RARE EARTH MINERALS plc
COMPANY
SHARE PRICE March 2017
FMC CORP
$59 / £48.50 $33 / £27 $76 / £62.50 $244 / £200 127,500krw/£90 $102 / £84 269,500krw/£191 1,268jpy/£9 540jpy/£4 / 0.45aud / £0.28p 2.83aud / £1.74 / 0.46aud / £0.28p 1.26cad / £0.77p 14,300krw/£10 / 0.92cad / £0.56p / 13,750krw/ £9.70 5.73hkd / £0.61p £0.81p / $5.6 / £4.50 10euro / £8.70 /
QUIMICIA & MINERA
ENERYSYS TESLA MOTORS INC SAMSUNG SDI CO ltd ALBERMARLE CORP
LG CHEM PANASONIC CORP GS YUASA CORP
SIMPLO TECH GALAXY RESO OROCOBRE FDG ELECTRIC VEHC PILBARA MINERALS NEMASKA LITHIUM
L&F CO ltd DYNAPACK INTL LITHIUM AMERICAS ADVANCED LITHIUM VITZROCELL CO COSLIGHT TECH BACANORA MIN CHANGS ASC ENT ULTRALIFE CORP BLUE SOLUTIONS CHINA BAK BAT
GLOBAL X LITHIUM FUND
$26 / £21.50
TIANQI LITHIUM LITHIUM X ENERGY PURE ENERGY MIN JIANGXI GANFENG RARE EARTH MIN YASUNAGA RB ENERGY
/ 1.65cad / £1 0.55cad / £0.33p / £0.51p 1,700jpy / £12 OTC market £78,929
X 100 shares per company*
CURRENT SHARE PRICE
PERCENTAGE INCREASE/DECREASE
Avg %
*Does not include OTC markets and share prices that are not available. These may be added to the portfolio in my updates (9 x total companies).
This table will be updated every quarter with the change in each companies share price and the overall performance of the portfolio.
My next paper on ‘The White Gold Rush – Is lithium gaining power?’ will be released on July 1st 2017.