How to Invest in Lithium: A Comprehensive Guide

HOW WOULD YOU INVEST IN LITHIUM 1
HOW WOULD YOU INVEST IN LITHIUM?
By (Name)
Name of the class (course)
The Course instructor (Professor)
The Institution
The City and State location
The Date

HOW WOULD YOU INVEST IN LITHIUM 2
Introduction
Lithium also referred to as white petroleum” is a, silver/white, highly reactive, soft and
inflammable metal. Lithium is processed from a mixture of fused chlorides of lithium and
potassium by electrolysis at about 500 °C. US Geological Survey of 2018 estimated global
lithium reserves to be about 16 million tons (Huang & Kresin, 2016, p. 115). It is, however,
difficult to get an accurate amount of reserves of lithium in the world because most schemes
applied to classify lithium only account for solid deposits while overlooking brine because of
varying pumping effects and lithium concentrations.
Lithium and its derivative compounds have numerous industrial uses, including the
production of heat resistant ceramics, lubricants and metal flux additives and lithium and
lithium-ion batteries. Australia, Argentina, and Chile are the top three lithium-producing
countries. South America hosts the biggest brine producers while the largest hard-rock mines are
in Australia. Chile and Australia produce more than two-thirds of global lithium (Krebs, 2016, p.
200). Since Lithium Carbonate is the most significant and market valuable derivative of lithium,
lithium products are converted into Lithium Carbonate Equivalents (LCE).
(a) What factors have driven the lithium boom?
Lithium trade has seen a tremendous increase in pricing after the 2006 crisis when
leading suppliers lowered lithium carbonate prices by about 25%. In 2012, competition between
two major lithium processing companies, Rockwood, and SQM) saw a dramatic increase in
pricing and production making “FMC" a Philadelphia-based based company the biggest producer
(Lide, 2017, p. 130). Global consumption of lithium is projected to increase to about 300,000
metric tons by 2020 up from 150,000 tons in 2012.
The increase in price and production has been necessitated by two main factors,
increasing the desire for lithium battery-powered devices mainly in China and the willingness to
battery storage for solar and other renewable energy sources from Tesla. Demand for lithium
batteries needed to power cell phones, electric vehicles, and wind turbines has been rising at
about 25% annually compared to the 5% overall annual gain in production of lithium. Production
and marketing of electronic devices such as mobile phones and laptops have led to a dramatic
rise in demand for lithium.

HOW WOULD YOU INVEST IN LITHIUM 3
According to the European Commission, the amount of lithium in rechargeable batteries
is expected to increase ten times between 2010 and 2020 and the tonnage of lithium in portable
batteries reached over 80 % of the market share in 2017 compared to 0 % in 1991. Recently,
lithium prices have doubled on the global market in the last two years about $16,500 per ton
(Lodders, 2015, p. 112). Demand for Lithium based batteries is projected to grow to about 67.6
billion dollars by 2022. In tandem, the price of Lithium has risen sharply from about 6,500 US
dollars per ton in 2015 to over 20,000 US dollars in 2018.
Use of lithium in large electric and hybrid vehicle batteries is a crucial factor driving
lithium boom. Major vehicle manufacturers such as BMW, Mercedes Benz, Volkswagen,
Toyota, Mitsubishi, and Audi had incorporated large lightweight lithium-ion batteries in their
vehicles by the end of 2013. Fearing that demand for lithium may overtake supply, major
manufacturers such as Toyota launched joint ventures with mining companies such as Orocobre
Ltd an Australian based lithium mining company to secure a monopoly on their lithium deposits.
The European Union acknowledges that while the establishment of electric vehicles reduces
overreliance on fossil fuels, it also increases demand for electricity and other raw materials such
as lithium. China currently produces over 55 percent of lithium-ion batteries used worldwide and
plans to triple production annually until 2026. Additionally, in response to the need for clean
energy, China intends to produce 5 million electric vehicles by the year 2020 (Kamienski, et al.,
2019, p. 100). Consequently, increased production of electric automobiles and energy storage
solutions will make Lithium one of the most important global energy commodities.
Utility Storage Solutions are a less known but significant factor that could drive demand
for Lithium. Many countries across the world are modernizing their old fashioned electric grids
using high-density Li-ion energy storage batteries because they are more efficient. Also,
electricity utility companies now prefer storage energy in battery junction boxes during off-peak
seasons and using it during peak time hence mitigating the high peak demand (Lodders, 2015, p.
82). It is expected that deployment of stored energy in utility, residential and nonresidential
electric systems will increase more than ten times in three years leading to the growth of the
energy storage market to more than 3 billion US dollars.

HOW WOULD YOU INVEST IN LITHIUM 4
(b) As an investor in lithium, where would you choose to invest to extract the most
value? (Weighting: 70% of assignment mark)
Introduction
Currently, global demand for industrial grade Lithium already will outstrip production
three times over. Electric Car producers target to produce over 20 million electric motor vehicles
by 2025. It is estimated that 10kg of Lithium will be required by each car and therefore more
than one million tonnes of Lithium annually would be required annually. Due to this continual
demand for Lithium, Lithium prices are ever increasing; this makes this industry for individuals
thinking of investing. Investment in Lithium industry can take two forms, direct investment in
lithium or its derivative products such as batteries or ceramics and what is popularly known as
pick and shovel investment which involves investment in indirect processes such as in the
production of Carbon for the manufacture of Lithium Carbonate.
Lithium has many industrial applications and can be used to produce various types of
market products. After, mining and extraction from deposits, lithium is then processed into three
primary forms; lithium hydroxide, carbonate, and metal. Lithium hydroxide and lithium
carbonate are processed to remove contaminants into battery grade hydroxides and carbonates of
lithium which are majorly used to make cathode material for batteries (Lodders, 2015, p. 114).
Lithium hydroxide although more expensive than carbonate is more efficient for production of
cathode material and is also indispensable in the production of other types of lithium based
cathodes
Lithium metal is also used in the production of high-energy-density batteries anode
material. Electrolysis of potassium chloride and lithium chloride is the most popular method of
producing lithium metal. Increased use of solid-state batteries as an alternative to conventional
lithium-ion batteries for energy storage has increased the popularity of lithium metal (Martin, et
al., 2017, p. 80). Apart from production of battery-grade material, Lithium is also marketed as
technical-grade lithium. Technical-grade lithium is used industrially mainly for the production of
technical-grade lithium concentrate which is a cheaper alternative to battery-grade Lithium.
Technical-grade lithium is used to make products such as glass and ceramics. Lithium is also
used in heat-resistant glass, lubricant and pharmaceutical industries.