The big bullish story on lithium holds that once consumers make the switch from fuel-burning cars to electric vehicles, the resulting demand for high-quality lithium batteries could make millionaires of investors exposed to lithium miners. However, consumers aren't making the switch overnight, and most consumers seem reluctant to do so, but Dundee Analyst Mansur Khan sees a tipping point on its way, along with blue sky potential. How much is hype? Who knows?
Currently the lithium market is saturated with supply, and bringing new supply on line will largely depress prices. So it depends on how successfully new projects can come on-line, how disciplined producers are in introducing new supply (not flooding market), how they position themselves within the lithium value chain and how strategically buyers source supply and promote a diversity of producers, jurisdictions and mining methods.
Does sound confusing? Well, it is.
We see that Galaxy Resources Ltd. ( GALXF.PK ) has had commissioning challenges over the past year and FMC Lithium Corp. ( FMC ) is having its own expansion issues. So supply isn't always as easily and smoothly expanded as seems theoretically possible.
Demand growth plays a key role in determining the pace at which new supply can be brought on-line. And, keep in mind that industry estimates currently forecast a doubling or tripling of lithium demand by 2020, depending on the market share of electric vehicles (EVs) and the mix of hybrid vs. full EVs --- right now, hybrids are winning that battle. So, if EVs gain a large share of the market, we may very well go from worrying about oversupply (which is what we have right now) to worrying about a shortage.
So it's a bit difficult to say exactly what the near-term picture will look like, and the long term picture is murky at best.
