Golfers Get Their Hands on Lithium... Literally
Lithium is the new “it” metal, no doubt.
You can tell because it's starting to turn up in some places you wouldn't expect...
The Ryder Cup, for example.
The United States' team won a resounding victory over its European counterparts 17-11. It was its first win in more than a decade.
Obviously, the golfers played well, but they had a helping hand in the form of lithium battery-powered hand warmers.
Indeed, the tournament was played in Hazeltine National Golf Club in Minnesota, where temperatures are in the 50s right now.
That's a little cooler than most golfers would like — especially professional golfers participating in such a prestigious tournament. Hence, the secret weapon.
Both U.S. and European teams deployed the lithium-powered mittens and hand warmers made by G-Tech Apparel. The thermal insulation uses an 11V lithium polymer battery to power a grab-bar inside that has four heat levels.
Manufacturer G-Tech, which is privately held, has agreements with teams in the NFL and the CFL as well. And many hunters use the device to keep their hands warm when handling their firearms. So it's not hard to see there's a military application here, too.
Speaking of which, the U.S. Defense Logistics Agency (DLA) said on Wednesday that it would stockpile more lithium compounds for batteries.
The agency announced a mandate to buy 600 kg of lithium cobalt oxide and 2,160 kg of lithium nickel cobalt aluminum oxide in the fiscal year starting Oct. 1. That's double the 300 kg of LCO and 1,080 kg of NCA it was mandated to buy in the 2015-2016 fiscal year.
Of course, that's for lithium-ion batteries more likely to be used for mobile phones, laptops, and electric vehicles.
Those are the more common uses.
In fact, electric car sales jumped 42% worldwide in the first quarter of 2016, and have reached record levels every month this year. Monthly sales now exceed 15,000 units, winning 1% of the total auto market share for the first time ever.
By 2040, 35% of light vehicles sold will be electric, generating a battery market worth a projected $250 billion, according to Bloomberg.
This is mostly due to a reduction in battery costs.
Lithium-ion battery costs have fallen by 65% since 2010, reaching $350 per kWh in 2015. It's expected to drop well below $120 per kWh by 2030.
Lower costs also mean lithium batteries can be used in a wider array of products, like hand warmers and hover boards. It's similar to the way LED lights have replaced incandescent light bulbs. Batteries have gotten better. But building a better battery means more lithium.
Hence the huge rise in demand...
Lithium Demand, Prices, and Stocks
Macquarie Research estimates global lithium demand will rise to more than 260,000 tons in 2020. Metals and minerals consultancy Roskill Information Services has a similar estimate, pegging its base scenario for lithium consumption at 290,000 tons in 2020. However that figure rises to a whopping 420,000 tons in its "optimistic" scenario.
In any case, 2020 supply figures to be less than 238,000 tons.
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The apparent shortage is what's responsible for the boom in lithium prices, which have soared 33% in the past year from $6,000 per ton to $8,000 a ton. And it's likely to make $10,000 by year end. In some cases, it's even fetched as much as $25,000(!) on the spot market.
As for lithium producers, 86% of production comes from just four large companies:
- Albemarle (NYSE: ALB)
- Chemical & Mining Co. of Chile (NYSE: SQM)
- FMC Corp (NYSE: FMC)
- Talison Lithium (a JV by Chengdu Tianqi Industry Group and Albemarle)
These stocks have done rather well this year.
Albemarle is up 49%, SQM is up 45%, and FMC is up 22%.
Australia has been a hotbed of activity as well. It's the world's largest supplier, and its proximity to China gives the country a huge advantage over other big producers in South America.
The biggest lithium mine is currently the Greenbushes lithium mine in southwest Australia. It's owned by Talison, which itself is 51% owned by China's Sichuan Tianqi Lithium Industries. U.S.-based Albemarle holds the rest.
Greenbushes is the world’s largest single lithium reserve. It has a proven and probable mineral reserve estimate of 61.5 million tonnes of spodumene ore grading at 2.8% lithium. (Note: 2.8% is extraordinarily high quality.) That translates to roughly 4.3 million tonnes of lithium carbonate equivalent. It's also been operational for more than 25 years, making it the longest continuously operated mining area in western Australia.
There are two lithium processing plants on site that recover and upgrade the spodumene mineral into a range of products for bulk or bagged shipment.
The operation is just 150 miles south of Perth, and has ready access to multiple ports.
Neometals (ASX: NMT), another player, is looking to commercialize its lithium resources at Mount Marion in the goldfields region of western Australia. It will launch a pilot plant in the fiscal year of June 30, 2017.
And Galaxy Resources (ASX: GXY), which is in the middle of a friendly merger with General Mining (ASX: GMM), resumed production at its project at Mt Cattlin in July.
Of course, if you really want to profit from the lithium boom, our own Nick Hodge recently released a HUGE report on the subject detailing the least known, and best prospective lithium investments.
He's been covering this since before it was a trend. So he knows what he's talking about. Check out his report and stock picks here.
Jason Simpkins is a seven-year veteran of the financial publishing industry, where he's served as a reporter, analyst, investment strategist and prognosticator. He's written more than 1,000 articles pertaining to personal finance and macroeconomics. Simpkins also served as the chief investment analyst for a trading service that focused exclusively on high-flying energy stocks. For more on Jason, check out his editor's page.