Why Lithium Investments Are Wall Street's Hottest Stocks
“We're talking terawatt scale. The goal is complete transformation of the entire energy infrastructure of the world.” — Elon Musk, Bloomberg (May 1, 2015).
That sounds like a big claim to make...
Energy for the whole world?
It's not as far-fetched as it seems.
Think about this:
Phones, laptops, rechargeable batteries...
That's an easy connection to make.
Cars, solar power, wind power...
Makes sense so far...
Glass, metal, nuclear fusion...
Okay, go on...
Air purification, medicine, pyrotechnics...
Whoa, where are we going with this?
From the battery in your cell phone, the glass in your windows, the energy that runs through your home, and even the air that flows through space ships: Lithium is an essential ingredient of life.
The world we live in thrives on energy, and our need for it will only increase in the future.
Just think of all the hybrid and electric cars that you see on the road today... Rechargeable lithium-ion batteries are what keep them running. Your cell phone? Same thing. And these conveniences aren't going away anytime soon.
Lithium keeps your home comfortable, too. The glass in your windows has ties to lithium. It's a major way for glass makers to save energy in the melting down and mixing of materials and for them to make the glass stronger with fewer impurities. It does the same in the production of household metals like aluminum and copper.
But everything comes back to the energy that powers these things and most everything else we use.
No matter what you're using, lithium is there to help it run.
Do I Have the Energy for This?
Look at how the U.S. uses various kinds of energy:
The U.S. has five main sources of electricity, according to the Energy Information Administration (EIA): coal at 17%, natural gas at 33%, petroleum at 28%, renewable energy at 12%, and nuclear power at 10%.
None of those are lithium.
Or are they?
Coal is a very unclean and nonrenewable energy source. Once it's gone, it's gone. However, it does have a redeeming quality: It is comprised of many other minerals and metals that make up the leftover remains when coal is used. One of those metals is lithium.
So, when the coal supply runs low, we can recycle the leftover parts for lithium.
Natural gases need to be harvested and transported to be of any use to anyone. And to be efficient and safe, these gases need to be cleared of impurities and moisture. What on Earth could be used to safely clean and dry natural gases for the energy world?
Lithium. The ionic properties of the metal make it a great magnet for moisture and a chemical catalyst for the absorption of carbon dioxide and the formation of oxygen. No wonder it comes in handy for space and deep-sea travel!
But what are the chances that you'll be in space today? Let's get back to the energy talk.
Nuclear power is one of our greatest advances. And before too long, we could be using nuclear power for the majority of our energy sources. And lithium is all over it.
Not only is lithium a great coolant, an absolute must for nuclear reactors, but it's a big part of nuclear fusion, as well. Remember how I said it attracts impurities? In fusion, it pulls spare neutrons out of other ingredients for atom-splitting fusion results.
And in the future? Green energy through solar or wind power, anyone?
Lithium's main modern use is rechargeable batteries, which have the power to store energy for later use. This can help extend the time you can use energy harvested by solar and wind energy plants — fear no more the windless day or dark of night! Lithium is saving up power for when you need it.
Still with me? That means your screen is still on and your computer is still running.
Thank you, lithium!
Where Is This Coming From?
Lithium does not occur by itself in nature. It's abundant on Earth but only as a part of other mineral mixtures. Saltwater brines, rocks, and clays all have lithium in them.
This graph shows the sources of lithium by percentage.
As you can see, the largest portion of lithium comes from continental brines.
Despite this, rock-centered Australia was the biggest producer of this versatile metal in 2016, and it brought in 14,300 tons from its hard-rock mines.
The second-biggest producer of lithium in 2015, Chile, came close with 12,900 tons reported. However, it is second-to-none in lithium reserves: 7,500,000 tonnes of it are being saved for future use. This is because, unlike Australia, Chile does get its lithium from brines under salt flats.
The U.S., with only one on-land lithium mine in Nevada, came in at no. 8 on the list of the world's largest lithium producers. Despite this, Nevada is where famous front-runner Tesla has recently begun operations in its massive Gigafactory 1, which will tap into those Nevada reserves and produce a portion of its battery supply directly from the source.
Lithium-powered cars, homes, and businesses are already becoming mainstream.
What Can I Do With This?
If you're planning to invest for the future, Tesla is where you want to start. But not the company itself, mind you...
Tesla's announcement of its Gigafactory 1 last year spurred a huge reaction in the lithium battery world. Now that it's operational, the race is on.
Several companies have already been making rechargeable batteries for devices and hybrid cars for years, but the Gigafactory 1 raised the bar. Now, nearly every major carmaker in the world is manufacturing at least one electric vehicle to add to its fleet. And that's not to mention the tech companies and transportation startups that have jumped on board!
Only, I doubt there will be enough supply to go around.
Tesla's Gigafactory 1 was originally slated to be operational by 2020 but is now expected to be operating at full capacity by 2018.
However, rather than investing in Tesla and its history of slow production and missed deadlines, look to its biggest partner instead.
Panasonic, the company that's been providing major electronics to the world for years, has already invested. This battery company has business all over the world and not only has a stake in Gigafactory 1 but also the second one still being planned for construction in Japan.
Lithium, as I've said, is not rare. The supply, both already harvested and still untapped, is vast. But so, very clearly, is the demand. Even Chile's huge reserves may not be enough to keep up!
The Gigafactory 1 is estimated to need 93,000 tons of lithium per year. To put that in perspective, the world only produced 35,000 tons total in 2016.
Tesla's current Model 3 preorders alone imply that it still won't be able to keep up with demand, and that isn't the only thing the company will produce batteries for. In early 2017, Tesla partnered with Southern California Edison to bring online an 80 MWH Powerpack system, just one of many utility-scale systems being installed around the world.
All of this means high demand to deplete that huge supply of lithium. And Tesla is the springboard to get this investment on the road and into our homes.
As valuable and useful as lithium is now, it's only going to get bigger as demand takes off.
Energy and Capital