Lithium: The new gold
Lithium, a silver-white alkali metal, has been around us for centuries, but it wasn’t until a few years ago that there was a sudden increase in the demand for lithium which led to a global rise in investment in lithium stocks.
This lithium boom was a direct result of the rise in the electrical vehicle industry which relied on lithium-ion batteries, and this led to lithium being called the new gold or the white oil.
Electric vehicles are seen as a peek into the future, a combination of the sleek design of the outer body and an engine that is both easy on nature and the owner’s pockets.
And thus the investors of lithium made tons of money as the demand was much higher than the supply. The prices skyrocketed in 2018, and then something changed.
The mammoth rise in the use of lithium in electric vehicles
As the lithium prices rose from 2015 to 2018, more and more lithium businesses started rising. Companies like Tesla and BMW have been massively investing in Electric Vehicles, especially cars, which are seen as the answer to the rising environmental crisis.
With the rising demand, this lithium became the most sought-after business for investors. As the supply grew, prices began to fall and investors lost their profit margins.
What the lithium markets are facing is called the problem of oversupply. The supply is projected to triple by 2025.
Is lithium still the gold we projected it to be?
This one is a complicated question that has multiple aspects. Let me try to simplify it for you.
Will the rise in electric vehicles continue?
The growth in electric vehicles has been rapid in the last decade. 2018 recorded 5 million passenger electric cars in stock. Moreover, in terms of Greenhouse Emissions and sustainable energy sources, many countries have welcomed electric vehicles.
From transit buses to tractors, all vehicles are switching to battery-powered energy sources. There is an ongoing global movement to phase out combustion engines with Canada, UK, France, Norway, and Sweden taking the lead.
The interplay of the rising demand and policy changes concerning this white metal is showing good signs of future rise. But not all experts agree with this. While some believe that electric cars are the future of green and clean earth, many still hold doubts about their market growth.
The latter argue that though the market for electric vehicles is rising, it is still a very less percentage of the total number of vehicles purchased for commercial use. For the current oversupply in lithium to be profitability utilized, the production rates for electric vehicles will need to grow by at least 30% in the coming years.
Is lithium the most sustainable option for EVs?
Another point of view is looking at lithium as a sustainable source of energy.
Lithium is no in as much abundance as we deem it to be, the reality is that lithium isn’t as sustainable as we deem it to be. The means of extraction aren’t very friendly to the environment as they involve excessive use of water coupled with carbon emissions.
There is also the obvious depletion of resources. Concerns regarding lithium’s ability to withstand the constant growth in demand have been raised.
Moreover, the vehicles industry is driven by innovation. With hydrogen tanks competing with lithium-ion batteries already, who knows when the automobile giants may suddenly come up with another new gold.
Well, the above analysis points to a possible rise in lithium prices in the coming years.
A simple rule of markets is that when a commodity is sold at lower prices, the markets push further to use this commodity for different uses. Such innovation is expected to even out the demand with the current oversupply and provides relief to the investors.
Today, lithium stands at a strong position as a relatively less harmful source of energy. And this should work in its favor. As far as depletion is its resource is concerned, that is, in my opinion, is a long shot. At least for the coming decade, investment in lithium can prove to be of benefit.
Frequently asked questions
1. What is special about lithium-ion batteries?
- In comparison with traditional batteries, lithium-ion batteries get charged faster and the charge lasts longer. The overall battery life is also higher than usual batteries.
2. What will replace lithium?
- Some of the commonly known alternatives to lithium-ion batteries are hydrogen fuel cells, redox flow batteries, and solar-powered panels.
3. What are the best lithium stocks?
- Some famously known lithium stocks are Tesla Inc. Nio Inc, General Motors Company, Albemarle, and Piedmont Lithium.
4. Is lithium a good investment in 2021?
- Lithium has shown considerable growth as the economic effects of the pandemic have started decreasing. Investment in lithium may prove to be beneficial in long term.
5. What lithium company does Tesla use?
- Tesla has been procuring lithium from Ganfend since 2018.