The Fuel of the Future:

Lithium Market is Heating Up.

The Race for Lithium is Heating Up

The next global extinction event won’t take place because of an asteroid crash.

And it won’t be from catastrophic storms or Chat-GPT taking over the world.

It’ll be for one simple, stupid reason: we didn’t get enough of this specific one metal fast enough.

The metal is in your pocket right now, will be in your car in five years (if it isn’t already) and will be built directly into your house (and every new building) by the end of the decade.

In 2010, the world used about 100,000 tons of it.

In 2030, demand will be 3 million tons and rising — a 30-fold increase.

Every single day will consume a month’s supply and no other metal has this trajectory.

This life-saving metal is lithium. And until a few years ago, its uses were relatively obscure.

Lithium is the third-lightest element—after only hydrogen and helium. So, it’s good for alloying with other metals to use in aircraft bodies or in crafting special glass.

It also has curious effects on the human body…

Lithium was both the “7” (element number) and “Up” (mood enhancer) in 7-Up until 1948. Now, it’s used to help treat bipolar disorder and depression.

And now, lithium has also become, in just a few years, the linchpin for all of human survival.

How? The lithium-ion battery.

It’s been around for forty years. But it’s on the cusp of becoming the most important energy technology in the world.

One Battery to Rule Them All

The 2019 Nobel Prize for Chemistry was given to three researchers for work they had performed more than forty years earlier.

The work had been fueled by the Arab oil embargo of 1973. One of the Nobel prize winners—a worker at Exxon—started trying to find a replacement for his company’s product.

He started with lithium.

At the same time, another of the researchers began trying to find a suitable successor for cars’ bulky, leaky lead-acid batteries.

He also started with lithium.

Both researchers ended up in the exact same place: a lithium-ion battery.

Their history-making, world-saving invention was immediately put to use as tiny batteries in consumer electronics.

Lithium’s low -weight, high-energy-density properties made it perfect for small devices. And now, iPhones and iPads and Surfaces and Nikons and Limes all have lithium-ion batteries.

But that trifecta of researchers won the prestigious prize for a much, much bigger reason…

  • The lithium-ion battery is the key to the first step in reducing carbon emissions and electrifying transportation.

Four decades after it was first created, the battery has finally been fully developed for its original use: cars.

Just as the researchers envisioned, it will fully replace both the lead-acid battery and the refined oil used by outdated cars.

That alone is going to require billions of lithium-ion batteries.

  • But at the same time, the lithium-ion battery is the key to the second step in reducing emissions: utility-scale storage for the entire energy grid.

And that’s going to require more lithium-ion battery capacity than has been used in the history of the world up to this point.

We’re Gonna Need a Bigger Factory

The International Energy Agency says that about 2 billion EVs need to be on the road by 2050 for the world to hit net-zero.

Only 1.98 billion to go.

The technology transition will fully enable the energy transition, and it’s happening in real time in record pace adoption.

At the same time, the United States has tripled its utility-scale battery storage—in just one year.

And it’s estimated that it will install 14x that… in the next three years.

  • Combining cars and storage, the growth in demand for lithium-ion batteries from 2020–2021 was equal to total demand in 2018.

And then it nearly doubled again in 2022.

It’s an exponential effect, and it is going to require lithium-ion battery production on a scale that our planet has never seen before.

That’s why companies like Tesla are gearing up to build batteries for EVs and energy storage like never before in human history.

In fact, Tesla’s first Gigafactory, in Nevada, is the largest building ever constructed, at nearly a mile long.

It’s run by a former LEGO executive, which tells you how many batteries it plans on making.

Long-term, it’s expected to achieve production of 500 GWh per year. That’s enough batteries for all the EVs sold in 2021, from a single factory.

But that’s nothing compared to the “megafactory” Tesla has opened in California.

They referred to it as their “pilot plant”—“just a test,” Tesla says. And it’s the thirteenth-largest battery factory in the world.

Once it’s operating at capacity . . .

  • The first megafactory will deploy more energy storage in a single quarter than Tesla Energy has in its entire history.

Just two years ago, Benchmark Mineral Intelligence predicted that in 2029, only 2 TWh of battery storage would be produced worldwide.

By 2030, Tesla plans to produce 3 TWh of batteries per year—itself.

That’s enough for thirty-five million cars.

And it would require about 2.5 million tons of lithium. That alone is 25 times the global consumption of lithium for just Tesla batteries in one year.

But that’s only one company . . .

Not Enough of a Good Thing

More than 200 battery megafactories are in the pipeline to be built through 2030.

Operating at full capacity, they’d need thirty-seven times the amount of lithium produced in 2020.

In fact, the International Energy Agency says demand is growing faster for lithium than for any other metal or mineral.

In other words:

  1. We need more lithium than anyone can imagine, and
  2. We need it faster than anyone believes is possible.

The good news is that all of that lithium exists.

In fact, lithium is one of the most abundant elements on earth. There’s more than enough of it to battery-fy the world.

The bad news is that the lithium is in the ground.

Getting it out is cost – and time – intensive. And it will be at least a decade before supply can catch up to demand. The mining infrastructure was never built out.

The volume of lithium that the auto and battery-storage industries need is on a different scale, and it’s changing everything.

Take a look at the lithium demand just for EV batteries in green…

This industry is on the cusp of maturing, and it must learn how to scale production very fast.

That could mean potential big profits for advanced – stage, U.S. lithium miners that enter production.

The price of lithium has risen so much over the past year that profit margins are unprecedented in the mining industry—it can sell for up to ten times what it costs to produce.

Do you like minting money?
Well, the lithium business is for you.

– Elon Musk on a Tesla earnings call

Lithium will be one of the most valuable materials in the world for the next century.

Competition to buy up lithium mines is going to accelerate—meaning some of their valuations could skyrocket.

And it could be very profitable for investors who play their hands well.

More on that tomorrow.


Marin Katusa and the Special Situations Team

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