Lithium is the latest hot metal commodity, but investor fever could be cooling – by Sunny Freeman (Financial Post – March 18, 2017)

Lithium, the lightest metal on earth, has become such a heavyweight in commodities markets that it is increasingly being mentioned in the same sentence as rare earths or vanadium. It’s not a compliment.

Once red hot, those commodities are just the most recent metals to experience a boom/bust cycle of quickly rising prices and a subsequent rush by miners into the space, only to end in burst bubbles.

Demand for lithium, a silvery-white metal called “the new gasoline” by Goldman Sachs, rose 26 per cent in 2016 and is predicted to climb another 39 per cent in 2018. By 2025, demand is projected to increase by 73 per cent as electric vehicles become more viable and an increasing number of countries, including China, tighten restrictions on gas- and diesel-powered cars.

The growth of electric vehicles, along with a broader push for battery storage to facilitate the growth of clean energy, has raised supply fears, sparking a rush of junior miners into the space. Many of these miners claim they could be first to disrupt the sector with technology that could make lithium cheaper and easier to extract.

But many analysts question whether the supply/demand dynamic is overblown. “Lithium is a great story because it’s a gigantic bubble,” said Jeffrey Christian, managing director at researcher CPM Group.

He believes the expected future supply shortage is over-hyped by lithium stock promoters whose estimates of electric vehicle numbers in a decade are three times what the auto sector is predicting. In addition, he adds that only about one per cent of the world’s lithium consumption comes from recycling, so any ramp-up there could massively undercut a supply shortage.

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