10 OCT.

2019

Green Metals , ISR , Temas

Nobel Prize 2019 Lithium, the new white gold

This year's Nobel Prize in Chemistry is awarded to a trio of researchers for the development of lithium batteries. The three researchers, American John Goodenough, British Stanley Whittingham and Japanese Akira Yoshino, are being recognized for their work leading to the development of lithium batteries.

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Appreciated for its conductivity of heat and electricity, lithium is principally used in rechargeable batteries, such as, electric cars, telephones, and portable computers. In 2016, this represented about 40% of the use of the material, from a previous 4% in 2000. In coming years, demand growth is estimated at between 10% and 15% per year.

Tesla is already the world’s biggest consumer of lithium; it is also predicted to become the largest producer of lithium batteries. Its new “Gigafactory” was developed to achieve production of 500,000 electric vehicles a year in 2020. When this is reached, the factory will be the world’s largest with a capacity greater than that of all others combined.

In light of growth in demand, investors have been questioning whether supply of this metal is significant, in the context of a substantial increase in lithium prices in 2017.

The risk of a lithium shortage is limited. According to some studies1 there is in fact a chance of a lithium surplus in coming years. If demand for lithium risks increasing, supply may also grow in response. Based on utilization rates and current reserves, we have more than 400 years of underground reserves2. These will be put into production in coming years, especially in China. While the lithium industry was long neglected (with low levels of capital invested in developing efficient exploitation techniques), the situation has changed. Innovations in exploration techniques have allowed operating costs to be significantly reduced and to transform an important part of the resources in reserve.

This global vision is nuanced by other studies which underline the difficulty of ensuring that lithium mine production keeps pace with the construction of conversion factories, but most studies don’t anticipate a lithium shortage in the short term3.

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1
Several broker studies, including Bernstein “Global Metals & Mining – Lithium: the big short” and Barclays.

2 Resources include the whole of the volumes that exist underground. Reserves mean the volumes that can be retrieved in a given set of technological and economic conditions.

3 Exane BNP Paribas, “Usain Cobalt”, January 29, 2018