It’s no secret that the electric vehicle industry is on fire. Just this past month, Tesla unleashed its plans to launch its first fully self-driving vehicle and after only making EVs for five years, Lucid Motors is soon to make its public debut via SPAC, with a $24 billion valuation.
It seems like every month a new automaker seems to be jumping on the EV bandwagon. Deloitte predicts that 31.1 million EVs are expected to be sold by 2030, a compound annual growth rate of 29%.
Additionally, with advocates behind the industry like Biden, who plans to create 500,000 new EV charging stations by 2030, EVs are on their way to becoming more mainstream. This increased accessibility, in addition to a high-demand for climate-conscious solutions, means the market is likely to expand further in the future than ever before.
Apart from big players in the industry like Tesla and Nikola, though, one sector set to quietly benefit from the EV boom is lithium mining. Since all EVs require 7 to 10% lithium to power their batteries, lithium is the most used commodity in the EV sector. It’s no wonder that the sector has been predicted to hit $100 billion by 2025.
So what exactly is lithium? The commodity can be found in two types of deposits. The first one is brine or salty water. Over half of the earth’s brine is held in South America, while other sources can be found in the Middle East and in the US. The other place where lithium is deposited is in mineral rock, the most popular being spodumene, which contains up to 7.7% lithium oxide.
Once lithium is extracted from one of these two types of deposits, its raw material is then purified and processed into two main compounds (lithium carbonate and lithium hydroxide) or a group of specialty lithium compounds. Lithium carbonate and lithium hydroxide are both listed at different selling prices depending on the region they are sold in. And specialty lithium compounds are usually only used in very specific materials, like the alloy wheels on SpaceX rockets.
Before the age of EVs, lithium was known for its use as a medicinal cure for depression. But by 2015, with the explosion in lightweight, powerful, and rechargeable batteries for smartphones, laptops, and tablets, the commodity soared in demand. With a standard EV using 100 times as much lithium as a laptop and the Tesla Model S using 10,000 times as much as a smartphone,
Although lithium is in high demand, experts predict that deficits of the commodity will begin as soon as 2022 and last until 2030. Due to the supply shortage, miners are searching for more mines, but finding new deposits is notoriously challenging and can take over 10 years to extract.
Besides the commodity’s obvious utility to the EV industry, its high demand in consumer electronics is another reason the sector is set for growth. With rapid advances in the 5G network as well as shortages in the lithium supply chain, it makes sense that the commodity is already up over 90% in 2021.
The lithium market is on track to blow up and as it becomes more saturated, investment opportunities could become less attainable than in today’s market. Due to the market’s predicted boom, savvy investors are likely to try and get in early.