How Lithium Defied the Global Commodities Rout – by Biman Mukherji (Wall Street Journal – May 5, 2016)

http://www.wsj.com/

It has earned the nickname “white petroleum,” and thanks to its use in electric vehicles and smartphones, it is one of the few raw materials climbing in price in an otherwise broad commodities slump. In the Chinese market, lithium prices have more than tripled since the beginning of 2015, as hard-to-mine supplies fall short of demand.

The price of the feedstock—lithium carbonate equivalent—has shot up to as high as $20,000 a ton from $6,000 a ton at the beginning of 2015, said Anthony Tse, managing director of Galaxy Resources Ltd., a lithium-focused resources company, with assets spanning Australia, China, Canada and Argentina.

Lithium is the key material used in lithium-ion batteries needed to run everything from electric vehicles to iPads. Unlike other commodities, it doesn’t have a spot market and isn’t traded on any exchange. Prices are negotiated individually through contracts between buyers and sellers.

“The lithium market is short [on supplies] in the near term. Demand is increasing rapidly on the back of planned and actual electric vehicles, not just in China but also in [the] U.S., over the next five years,” said Ben Cleary, portfolio manager at Tribeca Global Natural Resources Fund.

Electric vehicles are grabbing a larger share of auto sales every year. That means total lithium demand will increase 500% from 2015 to 2020, Mr. Cleary predicts.A report from Goldman Sachs said lithium demand could triple by 2025 to 570,000 tons from 2015 levels, driven principally by battery applications. China and the rest of Asia are fueling the demand.

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