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Is Lithium The Future For Investors?

November 28, 2017
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With large infrastructure products coming to fruition, the demand for lithium is ever increasing. Will supply be able to meet consumer and industry demands?

Demand for Lithium Expected to Skyrocket

Between 2010 and 2014, the demand for lithium-ion batteries grew by 73%. Today, growth continues, with demand being fueled by the consumer electronics and electric vehicle industries.

In addition to these two key consumer facing industries, lithium-ion batteries are also being used in large scale electrical utility systems, with one of particular interest having just been completed in South Australia. With the state heavily dependent on wind-energy and the storage of harvested energy, the demand for Lithium could be about to skyrocket again.

Largest Lithium-Ion Battery Project Completed in South Australia

South Australia’s latest lithium-ion construction project is significant, because the proposed battery array can support at least 129 megawatts per hour.

Tesla Inc. (NASDAQ TSLA) won the bid to construct the battery array, and had agreed to be able to complete the project within 100 days. With the early completion being announced in late November, the project was actually signed off ahead of schedule, and the array was impressively able to store 31 megawatts within its first two minutes of operation.

This is a landmark achievement not only for Tesla, but also for anyone that is watching the battery market closely. If Tesla could deliver such a large battery within 100 days as promised, then it will make the use of harvested and stored energy more feasible for other nations and private companies.
This, of course, could lead to a huge demand for lithium, the critical raw material that is used in the construction of modern batteries.

How Will Supply Keep Up with Demand in the Coming Years?

Today, Australia is the largest worldwide producer of lithium. If demand should continue to surge, their mining industry will be one of the largest benefactors.

Australia currently mines around 36,000 tons of lithium every year, with Chile close behind with 12,000 tons. Between the two countries, they make up the majority of the 36,000 tons that is mined around the world each year.

Lithium has been branded as ‘white petroleum’ in recent years, thanks to huge demand. Supply has been a constant problem up until this time.

The lead times on both sourcing lithium and manufacturing batteries has been one of the reasons why Tesla is behind on electric vehicle production, and the company is now facing a $619 Million loss for the third quarter of the 2017 financial year.

Other companies may also struggle to fulfill manufacturing targets as the demand for lithium increases, and it’s yet unknown if the largest mining organizations will be able to ramp up production to meet the increasing rate of demand.

According to Zacks Research

Albemarle Corp. (ALB – Free Report) is the world’s largest lithium producer, and Bloomberg estimates its share of the world’s lithium to be about 35%.

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