#6. Lithium: Battery TINA (There Is No Alternative)

Lithium is the critical element of lithium-ion batteries, the predominant battery type used in electric vehicles and many consumer electronics. These deep-cycle batteries are designed to give power over sustained periods and have a high power-to-weight ratio, specific energy and energy density — reducing the vehicle's weight. Lithium demand is expected to have extraordinary growth, rising from 0.5 MMT (million metric tonnes) of lithium carbonate equivalent (LCE)6 in 2021 to ~ 3 MMT by 2030 (22% per annum growth versus ~3% per annum growth for mature metals), with batteries accounting for 95% of demand.

Lithium began as an EV story as various governments announced the phase-out or elimination of new internal combustion engine (ICE) vehicles by 2030-35. The EV story quickly morphed into a security of supply story as companies, governments and policymakers began to understand the strategic importance of securing these raw materials (Figure 3). Although China accounts for only 13% of lithium mine production and 8% of reserves, it dominates in the midstream and downstream portion of the lithium value chain. China has a dominant 45% share of lithium carbonate and hydroxide production, 75% cathode production and 70% lithium-ion battery cell production. This dominance in lithium by China is an untenable situation, more so now with China's growing influence in the oil markets. The West is in the process of securing its EV supply chain via legislative acts and policies.

Uranium, lithium, copper and other critical elements for the energy transition theme may be more insulated from economic cycles than other basic commodities as securing supply chains outmatches cyclical forces.

Figure 3. Lithium Carbonate Price USD/lbs. (2013-2022)

Source: Bloomberg. Data as of 12/31/2022. Included for illustrative purposes only. Past performance is no guarantee of future results.

Source: https://sprott.com/insights/sprott-monthly-report-2023-top-10-watch-list/