Lithium: Some Realities

Commodities | Sep 26 2017

Brokers warn that lithium demand may not grow as quickly as assumed while short term the market remains oversupplied.

- The impending death of the internal combustion engine
- Some realities about EV adoption
- The issue of infrastructure
- Impending supply response


By Greg Peel

Over recent months, France, the UK, Norway and India have laid out plans to ban the sale of internal combustion-powered vehicles by dates ranging from 2025 to 2040. The Netherlands and Germany are thinking about it, although in Germany's case the benefits are largely offset by the country's major source of power generation being coal.

At the corporate level, British Telecom (BT) has declared it will replace its fleet of thousands of service vehicles with electric or hybrid vehicles, while France's PSA Group, which owns Citroen and Peugeot, plans to electrify 80% of its range by 2023.

As these announcements have rolled out, the price of lithium has enjoyed a renewed surge. And while their share prices remain highly volatile on a daily basis, Australian lithium miners such as Orocobre ((ORE)), Galaxy Resources ((GXY)), Mineral Resources ((MIN)) and Pilbara Minerals ((PLS)) have ridden the wave.

The clincher came earlier this month when China announced that it, too, will ban fossil fuel vehicles, with a timetable now being determined. China is the world's biggest auto market. The lithium price had another leg up.

The lithium story is the latest bandwagon for excitable investors to jump on, as we've seen for the likes of rare earth metals and uranium in past years. The lithium story is not new – the price has had more than one burst over recent years on the same theme – but from humble beginnings it now appears electric vehicles (EV) are set to pretty quickly take over the world.

But is this really the case?

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