Prices for lithium are forecast to rise strongly in the next two years, with widespread adoption of electric cars tipped to be a game changer for the third element on the periodic table.
While most demand for lithium carbonate comes from industrial companies producing ceramics and glass, Citi analyst Matthew Schembri believes demand will rise significantly when electric vehicles become mainstream and need the commodity for lithium-ion batteries.
Citi is very bullish about electric cars, and forecasts production of pure electric models (not hybrids) like the Nissan Leaf or the Tesla Model S to rise from about 150,000 in 2015 to about 290,000 in 2016. By 2020, Citi expects 1.04 million electric cars to be in production, implying sevenfold growth over five years.
In an extensive study of what the boom in electric cars will mean for lithium carbonate markets, Mr Schembri said demand for the commodity would rise almost 65 per cent over the next five years.
“The mass adoption of pure electric vehicles such as the Tesla Model S or the Nissan Leaf would be a boom to the lithium market,” he said.
Electric vehicles account for about 6 per cent of lithium carbonate demand but would be 30 per cent of demand by 2020 under Mr Schembri’s numbers. The rise in demand is expected to lift prices for the commodity.
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