Commodities | Feb 10 2017
By Sam Green, adviser at Options Education Centre, TradersCiricle
The New Year has started with an abundance of news from the Lithium industry, as a tangible shift in the mobile energy mix appears to be taking place.
Increasingly, stakeholders are expressing a view that electric motor vehicles will replace their internally combusting counterparts, with this trend likely to have major implications for the global economy over the next few decades.
In January, petroleum industry website, Gasbuddy, asked the provocative question, “Has US gasoline demand peaked?” which generated heated discussion across several economic news websites. The company estimated that US gasoline demand has topped out, and that ongoing demand for gasoline is in permanent decline. They blamed increasing oil prices, as well as the increasing prevalence (and declining cost) of electric vehicles as leading to the change.
This sentiment was echoed by the Imperial College London, in collaboration with the Carbon Tracker Initiative think tank, who estimated that 2 million barrels a day of oil demand could be replaced by electric vehicles by 2025. They furthered that such an outcome would be similar to the 10 percent loss of market share that caused the collapse of the U.S. coal mining industry. Indeed, even oil giant BP has also quietly admitted that electric vehicles could displace as much as 5 million barrels of oil demand over the next 20 years.
One of the big drivers of the uptake of electric vehicles has been the rapidly declining cost, with prices falling faster than the most optimistic of forecasts. If this trend continues, the price of electric vehicles will reach parity with internal combustion vehicles by 2020.
Leaders of the automakers Ford and Audi have also come out recently to express their view of the coming dominance of electrified vehicles, with the Ford CEO stating that “15 years from now, is that there are going to be more electrified offerings than there are internal combustion engines,”
Because of the growing prevalence of electric vehicles, consumers will increasingly be able to charge their batteries at retail gasoline outlets. Indeed, Shell, long known as a market leader in greener gasoline technologies, plans to leverage their existing service station infrastructure in the UK and the Netherlands to offer charging points for electric vehicles; with the first to be installed by the end of the year.
The revolution is not just happening in the private vehicle sector either. Tesla Motors has recently announced development of an electric truck called the Tesla-semi, which Tesla CEO Elon Musk states “will deliver a substantial reduction in the cost of cargo transport”. Commercial vehicle fleets have traditionally shied away from electric vehicles, due to concerns over range and cost; but this latest announcement from Tesla would indicate that these shortcomings are rapidly being overcome through advances in technology.
With all the ground being made by electric vehicles, manufacturers are increasingly struggling to source electric vehicle batteries, and the lithium which they contain. According to Thomas Sedran, VW’s head of group strategy, “The capacity is not there,” “Nobody has the capacity.”
Rich rewards already exist for those producing the lithium required for electric vehicle batteries, and this is only going to increase with the anticipated increase in demand for electric vehicles. In fact, Australian company Galaxy Resources ((GXY)) recently started lithium production from their Mt Caitlin facility, which sent shockwaves through their share price. Their stock rose from mid-30 cents per share, up to just below 70 cents per share, all within the space of a few weeks. This would be incredible performance for a microcap stock, but Galaxy is a billion dollar entity.
We have also seen some exiting new lithium explorers hitting capital markets over the recent period. Not least of which a company called Lithium Consolidated Minerals Exploration ((LI3)), which plans to explore an allotment of land next to the leading lithium production site in North America.
The wealth of the 20th Century was largely built on the back of the oil boom, which powered our means of transportation. In the 21st century, the means of transportation are becoming electrified, and the spoils are once again likely to go to those who power our technology.
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