How to Trade Lithium

What is Lithium?

Lithium is a soft silver and white alkali element and metal found primarily in the earth’s crust and the oceans. It is not found freely in nature, but in a compound form with other minerals usually in igneous rock or in brine pools.

Lithium has physical properties that make it different from other metals. It is the lightest chemical element and the lightest metal. It is so soft it can be cut with a knife, and so low in density that it can float on water.

These unique properties make lithium and its compounds capable of energy density – the ability to pack a lot of power into a very small space. As a result, lithium has become an extremely important component of batteries for laptops, phone and other digital devices. Furthermore, its potential for use in other devices such as electric cars may be enormous. As a result, lithium is a very important global commodity that has experienced explosive growth in its demand.

Lithium’s discovery traces back to the 19th century when Swedish chemist Johan August Arfwedson identified the element in the mineral petalite. To this day, petalite remains an important source of lithium. Lithium is also found in igneous rocks such as granite pegmatite and in oceans and salt lakes.

Lithium Uses

Lithium has a range of uses in many different industries. Its uses vary by location and end-use markets, but in general the following industries comprise the bulk of lithium demand worldwide:
UseExamplePercentage of whole market usage
Batteriese.g. smartphone battery39%
Ceramic and glasse.g. fire viewing windows for fireplaces30%
Lithium soape.g. lubricating grease 8%
Lithium polymere.g. lesser known type of lithium battery5%
Air treatmente.g. air conditioner3%
Miscellaneouse.g. antidepressants10%
Chart to show supply and demand of lithium

Chart to show supply and demand of lithium. Source: Deutsche Bank

Why is Lithium Important?

The explosive growth in demand for lithium and the resulting rise in its price is almost entirely a function of its fast-growing adoption in batteries. Lithium batteries are used in an increasing number of products in different industries across the globe. By 2020, analysts expect batteries to account for more than 55% of lithium demand.

Tesla Model S

Electric cars like the Tesla Model S use half of the World’s lithium-ion battery supply

Shift to Electric Cars

Although less than 1% of automobiles run on electricity, these vehicles use half of the world’s lithium-ion battery supply. The size of the electric automotive market is expected to increase more than thirtyfold by 2030. As this market grows, its market share of lithium-ion battery use will almost certainly grow as well.

“We would basically need to absorb the entire world’s lithium-ion production.”

Elon Musk – explaining the challenge Tesla faces to hit their production target of 500,000 vehicles per year

The catalyst for this rapid adoption has been the incredible efficiencies achieved in lithium battery production. Lithium-ion batteries cost about $3,000 per kilowatt hour (kWh) to produce when they were first introduced commercially in the mid-1990s. This figure has plunged to $190 per kWh and is expected to approach $100 per kWh in the years ahead. To put this in perspective, $240 per kWh equates to about $3 a gallon gasoline while $150 per kWh equates to a gas price of $2 per gallon. These improvements are certain to hasten the move toward electric vehicles and away from fossil fuels.

Chart to show cost decreases of lithium ion battery packs and the corresponding uplift in annual demand

Data from Bloomberg New Energy FInance. Image via Visual Capitalist

Electric Consumption

Off-grid systems such as the Tesla Powerwall and other do-it-yourself imitators absorb an increasingly large supply of the world’s lithium production.

Tesla Residential Powerwall

Illustration showing residential installation of Tesla Powerwall. Image Source: Tesla

These systems allow consumers to store electricity from their electric grid or from solar panels in lithium-ion batteries. These energy-efficient homemade power grids are expected to grow in popularity as consumers seek cleaner sources of energy.

Large scale battery systems also have the potential to solve problems in areas around the globe that suffer from regular power cuts and energy shortages. For example, South Australia as a region frequently experiences powercuts as a result of storms and spikes in demand due to heatwaves.

Elon Musk, founder of Tesla, offered to solve this and install the World’s largest battery system. If that wasn’t a big enough challenge he even agreed to have it up and running in 100 days or he wouldn’t charge the Australian Government for it.

Elon Musk agrees to complete battery system in 100 days

Elon Musk agrees to the challenge on Twitter

Smartphone Demand

Before the automotive industry and off-grid systems began consuming a large percentage of the global supply of lithium, the smartphone and electronics industry consumed the lionshare of lithium each year.

Lithium battery demand was surging at a rate of more than 20% annually. Consumption has grown by high double-digits in recent years and has outstripped supply, which has grown at a slower rate.

Demand for lithium-ion batteries should continue to grow as smart home devices including thermometers, smoke detectors and alarms increase in popularity

Supply Shortages

Research suggest suppliers will struggle to keep up with lithium demand over the coming years.

Aerial shot of Tesla Gigafactory

Aerial shot of Tesla Gigafactory via YouTube

Giant lithium-ion mega-factories such as the Tesla Gigafactory could help bring economies of scale to production of batteries, but the pipeline of lithium needed to make these batteries could be subject to supply chain issues.

As demand for lithium continues to soar, world producers will have to harvest the mineral from new sources to keep up with demand. For example, scientists at Stanford University have been exploring how to extract lithium deposits from supervolcanoes in the US.

Not everyone agrees there will be a shortage of lithium. According to Deutsche Bank estimates, there are 185 years’ worth of reserves in the ground and leading mining companies plan to add 20 lithium production sites to the 16 currently operating.

“There are a lot of projects out there, and they’ll end up oversupplying the market.”

Mark Cutifani, CEO of Anglo American

7 Alternatives to Lithium-ion Batteries

The main reason the price of lithium has skyrocketed is because of the surge in demand for lithium-ion batteries; used in smartphones, electric cars and homes. But there are alternatives that just might beat lithium-ion to the punch as the power source of the future.
AlternativeWhy it might replace lithium-ionFurther Reading
Hydrogen Fuel CellsProduction of hydrogen is more cost-effective.Energy.gov
Lithium-sulphurLighter than lithium-ion giving this rechargeable battery a higher energy density.Wikipedia
Graphene supercapacitorsAble to hold hundreds of times the amount of electrical charge potentially suitable as a replacement for electrochemical batteries such as lithium-ion and lithium-sulphurGraphenea
Redox flow batteriesNearly limitless longevity dues because there are no solid-to-solid phase transitionsEnergy Storage Association
Aluminum-graphite batteriesQuick to recharge - as little as 60 secondsExtreme Tech
Bioelectrochemical batteries or "Bacterial Batteries"Perfect for use in remote, dangerous and resource-limited areas.TechCrunch

Which Countries Produce Lithium?

map showing World's biggest lithium producers

Worldwide lithium production has been steadily growing in response to its demand for battery applications and is estimated to be about 35,000 tons annually. The 7 leading mining countries include:

The Top Lithium Producing Countries

RankFlagCountryAnnual Production (tons)
#1Australia14,300
#2Chile12,000
#3Argentina5,700
#4China2,000
#5Zimbabwe900
#6Portugal200
#7Brazil200

However, some lithium mining remains secretive due to the highly competitive nature of the industry and the relative scarcity of the commodity. In the United States, for example, a brine operation in Nevada produces lithium, and two companies produce downstream lithium compounds from domestic and imported lithium carbonate, lithium chloride, and lithium hydroxide. However, these companies do not release production data, so US production numbers are unknown.

Which Countries Have Lithium?

Lithium resources are growing worldwide as geologists discover new continental brines, geothermal brines, hectorite, oilfield brines, and pegmatite. Estimates place current global reserves at c.40 million tons.

The Lithium Triangle

Over half of the World’s proven lithium reserves are within this area. Image source: VisualPolitik/YouTube

Top Countries by Lithium Reserves

RankFlagCountryReserves (tons)
#1Argentina9,000,000
#2Bolivia9,000,000
#3Chile7,500,000
#4China7,000,000
#5Brazil4,800,000
#6USA2,500,000
#7Australia2,000,000
#8Flag of CanadaCanada2,000,000
#9Democratic Republic of Congo1,000,000
#10Russia1,000,000

 

Why Doesn’t Bolivia Produce Much Lithium?

You may have noticed that Bolivia ranks high in terms of lithium reserves but doesn’t even appear on the list of top lithium producing countries. This is in short because Bolivia is a poor country and is only really just finding its feet in terms of lithium production. Bolivia’s president Evo Morales has committed to investing $995 million in the development of the lithium industry between now and 2019

How to Trade Lithium

There is unfortunately no way to invest directly in the lithium commodity, this is because there are no exchange-traded futures as with other industrial metals such as copper, nickel and aluminum. Perhaps this is because relative to these other metals, the quantity of lithium demand is much smaller. There are, however, ways for traders to gain exposure to lithium prices through investing in companies involved in the lithium industry.

The 15 companies listed below are publicly traded companies involved in lithium mining or processing.

The list is intended for information purposes only and inclusion here does not constitute investment advice.

15 Lithium Stocks

 Current PriceOverview ListingsFoundedInteresting Fact
Sociedad Quimica y Minera de Chile
The World’s largest lithium producer and a leader in producing lithium compounds.Start Trading with Plus500 *Your capital is at riskNew York (NYSE)1968Originally formed in 1882 as Anglo-Chilean Nitrate and Railway Company.
Albemarle Corporation
Specialty chemicals company and an industry leader in lithium and lithium derivatives products.Start Trading with Plus500 *Your capital is at riskNew York (NYSE)1984Started life as a paper manufacturing company.
FMC Corp.
Diversified chemical company that extracts and processes lithium.Start Trading with Plus500 *Your capital is at riskNew York (NYSE)1883Built amphibious landing vehicles for the United States Department of War in WWII
Liberty One Lithium Corp.
Canadian-based exploration company developing lithium brine deposits in the West Argentina.Start Trading with Plus500 *Your capital is at riskCalgary (TSXV)1996One of the largest land owners in the lithium triangle of South America.
Lithium X Energy Corp.
Operates two wholly owned brine projects in Argentina.Start Trading with Plus500 *Your capital is at riskCalgary (TSXV)1997Largest shareholder in Pure Energy (another lithium producer)
Altura Mining Limited
Australian-based lithium raw materials producer with a hard rock extraction project in Western Australia.Start Trading with Plus500 *Your capital is at riskSydney (ASX)2000Also has interests in coal and iron ore.
Nemaska Lithium Inc.
Supplier of lithium hydroxide and lithium carbonate supplier to the battery market.Start Trading with Plus500 *Your capital is at riskToronto (TSE)2007Owns proprietary technology that converts spodumene deposits into high-grade lithium hydroxide and lithium carbonate.
Critical Elements Corporation
Early-stage lithium exploration and mining company based in Canada.Start Trading with Plus500 *Your capital is at riskCalgary (TSXV)2006A producer of tantalum, another material used in the electronics industry.
Neo Lithium Corp.
Operates a brine operation in the southern end of the Lithium Triangle.Start Trading with Plus500 *Your capital is at riskCalgary (TSXV)2016Owns one of the highest-grade lithium brine projects in the World.
Dajin Resources Corp
Canadian-based mining company engaged in the acquisition, exploration and development of lithium deposits.Start Trading with Plus500 *Your capital is at riskCalgary (TSXV)1987Dajin management believe we are on the cusp of a lithium revolution.
International Lithium Corp.
Manages four joint-venture lithium projects in Canada, China, Ireland and ArgentinaStart Trading with Plus500 *Your capital is at riskCalgary (TSXV)2009Leading exploration for lithium in Ireland.
Pilbara Minerals Limited
Australian-based minerals mining company that operates lithium mining projects in Western Australia.Start Trading with Plus500 *Your capital is at riskSydney (ASX)2005Owns Pilgangoora, one of the largest deposits of spodumene in the World.
Galaxy Resources
Australian company that operates lithium production facilities, hard rock mines and brine mines in Australia, Argentina and Canada.Start Trading with Plus500 *Your capital is at riskSydney (ASX)1996Merged with General Mining Corporation in 2016.
Lithium Americas
50% owner of the largest lithium brine deposit in the world.Start Trading with Plus500 *Your capital is at riskToronto (TSE)2007Joint venture partner of Sociedad Química y Minera de Chile.
Orocobre Limited
Australian industrial chemicals company and lithium miner.Start Trading with Plus500 *Your capital is at riskSydney (ASX)2007Orocobre funds health programs in the communities where it works.

*Price information is delayed by 5 seconds and should not be used for trading purposes.

Further Reading

Lawrence Pines is a Princeton University graduate with more than 25 years of experience as an equity and foreign exchange options trader for multinational banks and proprietary trading groups. Mr. Pines has traded on the NYSE, CBOE and Pacific Stock Exchange. In 2011, Mr. Pines started his own consulting firm through which he advises law firms and investment professionals on issues related to trading, and derivatives. Lawrence has served as an expert witness in a number of high profile trials in US Federal and international courts.
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