Has Australia Locked in Their Next Commodity Boom?

Move over iron ore, coal and oil. Commodities of the future include copper, cobalt and of course lithium.

Lithium Price

In 2016, the price of lithium was on a tear. While you don’t hear the buzz surrounding it like you once did, the price of lithium has continued to climb throughout 2017.  Take a look at the graph below.

lithium price

Source: Bloomberg

Of course driving lithium prices higher is demand for lithium-ion batteries. According to a 2010 paper, ‘How Much Lithium does a Lilon EV battery really need?’, around 320 grams of lithium is needed per kilowatt per hour(kWh).

However, because of capacity loss and fade, lithium-ion batteries for electric vehicles (EVs), for example, would need to be 25% oversized.

Therefore, around 400 grams (320*1.25) of lithium would be needed for a real world EV per kWh. Assuming an EV battery has a 70 kWh lithium-ion battery, each EV would therefore need around 28 kilograms of lithium.

As you can imagine, the growth of EVs will largely determine the growth of lithium-ion batteries. Some estimates for EVs are as high as 41 million by 2040.

That would mean, for EVs alone, we need around 1.15 billion tonnes of lithium. Of course 2040 is a long way away. But if we were to just reach 5 million EVs by 2025, that’s still 140 million tonnes of lithium needed.

Lithium’s Market Potential

Assuming lithium trades for around US$15,000 a tonne, it’s a humungous market. Reported by Bloomberg, Australia has potentially already locked in their position as a major lithium supplier in the coming years.

Almost 60 percent of supply from planned large projects through about the next five years will be added in Australia, enabling the top supplier of lithium to cement its grip on the market, according to CRU Group. The biggest mines due to enter production next year are both about 120 kilometers (75 miles) from Port Hedland, the gateway to markets in China.

Pilbara Minerals Ltd. is targeting shipments to start in the second quarter of 2018 from its Pilgangoora project and advancing work on a potential expansion. Next door, Altura Mining Ltd. says it’s on schedule to start output in the first quarter and is also preparing to rapidly boost output.

Along with nearby Mineral Resources Ltd.’s Wodgina mine — the biggest known hard rock lithium deposit — these and other projects form an emerging cluster of global production, according to both Altura and Pilbara.

If project expansions advance as planned, the region “would be the largest production center in the world,” Pilbara Chief Executive Officer Ken Brinsden said Thursday in an interview in Port Hedland. “In my mind, that could be the case by the early to mid-2020s.”

lithium price

Source: Bloomberg

Don’t want to miss out of Australia’s next commodity boom? Find out what we believe are the top 10 Aussie mining stocks on the ASX right now here.


Harje Ronngard,
Junior Analyst, Markets & Money

Harje Ronngard is a Junior Analyst at Markets and Money. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.

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