Lithium carbonate has been used to treat bipolar disorder and other mental health disorders for several decades, but the compound was largely ignored as an investment opportunity until recently. Lithium prices have seen unprecedented growth over the past several years, increasing from $4,450 per ton in 2012 to $78,032 per ton in 2022. What explains this recent increase? How sustainable is it? What might happen in the future? These are some of the questions we will explore below.
The Supply Chain (from brine to battery)
When it comes to lithium, there are several stages in its production that can be adjusted. In one process, brine is treated with chemicals to extract lithium-ions; next, these ions are blended with other raw materials (like cobalt) and processed into a slurry; finally, they’re packed into graphite inserts and inserted into battery cases. Since each stage of processing is variable, companies can adjust their methods depending on how much of each ingredient they need. For example, if you have too much lithium and not enough cobalt, you might choose to use more of your supply of lithium for batteries and less for your product—it all depends on market conditions at any given time.
The Market (carmakers, utilities)
New energy regulations are pushing carmakers and utilities to look for ways to cut down on carbon emissions. This means that lithium-ion batteries, which have far lower carbon footprints than most conventional forms of energy storage, will soon be finding their way into electric cars, homes and power grids in earnest.
In fact, Goldman Sachs recently predicted that by 2025, demand for lithium could rise to 200 gigawatt hours (GWh) from just 17 GWh today. And it’s not just Goldman: The International Energy Agency predicts a tenfold increase in global demand by 2030.
The Competition (the other lithium players)
The market for lithium is controlled by a handful of firms. The two biggest players are Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM) and Albemarle Corporation (NYSE:ALB). SQM controls about one-third of global output, while Albemarle holds roughly 10 percent of production.
How it all ties together
Although lithium is very useful in a variety of industries and applications, it is most widely known for its use in rechargeable batteries. In fact, every single battery that powers your phone, laptop or other portable electronics uses some amount of lithium-ion (Li-ion) battery cells. Li-ion batteries are rapidly gaining market share against older technologies like Nickel Cadmium (NiCd), Lead Acid and others.
For these reasons, it’s easy to see why lithium is a key ingredient in high tech industries like electric cars and smart phones. Even if lithium prices continue to decline for another year or two, it doesn’t seem likely that other technologies will supplant Li-ion as our primary portable power source anytime soon.