Lithium is a metal with an awful lot of attention because of its versatile applications in industry and as a key component of electric cars. This is where it has earned the nickname "The White Gold." In this blog, we will take a closer look at what lithium actually is, where it comes from, what it is used for, alternatives and the possible disadvantages of using lithium.
To begin, what is lithium anyway?Lithium is a silvery-white metal found in nature in rocks, salt lakes and minerals. It has the lowest specific gravity of any metal and is highly reactive with water. Because of its low density and high energy storage capacity, lithium is a very suitable raw material for batteries and other electrical applications. Lithium is thus used to maximize the energy capacity of a battery.
Where is it mined?Lithium, discovered in 1817 by Swedish chemist Johan August Arfvedson, has an atomic number 3 and is denoted by the symbol Li. It is found in the Earth's crust, but especially in salt lakes and in certain rocks. The largest lithium reserves are in the Atacama Desert in Chile, Argentina and Bolivia, also known as the "Lithium Triangle. This is one of the driest deserts in the world, where about 50% of lithium reserves are extracted from salt lakes.
Processing into a finished productThe extraction process involves pumping water from the salt lakes and evaporating it in solar evaporation basins, a type of large pond. As the water evaporates, lithium is left behind in the form of lithium salts. These are then separated and purified into lithium carbonate. This material is processed into lithium hydroxide or lithium carbonate monohydrate through various chemical reactions, such as carbon atom elimination or neutralization with acids. The compound substances are separated into single substances under the influence of an electric current, with electrolysis, where this is finally processed into lithium metal. These are processed into the desired form or the final product, such as lithium batteries. All in all, a complex process!
What do we use lithium for?The final applications of lithium are numerous and offer promising possibilities for the future of energy storage and renewable technology. Today, the most important and well-known application is the production of rechargeable batteries, particularly for use in electric vehicles (EVs) and devices such as smartphones, laptops and tablets.
Furthermore, lithium is also used in the production of ceramics, glass and aluminium, and in the manufacture of lubricants, greases and air conditioning systems. in addition, lithium is used as a mood stabilizer in the treatment of bipolar disorder and depression.
From lithium to lithium-ion batteriesBattery technology has improved recently. Electric cars today are equipped with lithium-ion (Li-ion) batteries, which are the successors to lithium batteries. The major difference between these two types is in charging. Lithium batteries may, in fact, not be recharged, whereas Li-ion batteries are actually designed to be recharged many times. As a result, these type of batteries are more efficient, have a longer lifespan, and can store more energy.
What are the disadvantages?Despite its many useful properties, lithium also has some disadvantages. It is highly reactive and can spontaneously combust in the air. The Australian United Firefighters Union has already expressed concerns about the fire danger. It also requires 20 times more water to put out an EV fire, compared to a car with a regular internal combustion engine.
Are there alternatives?As the lightest metal, lithium is critical to the EV market. However, great strides are being made in the development of sodium-based batteries. These may eventually be able to make up for lithium shortages. In addition, the development of solid-state batteries is now taking a more serious turn. This new generation of batteries combines higher energy density with lower fire risk due to the absence of liquid elements. Although promising, these alternatives are still in the development stage and are not yet widely produced or used. Thus, more research and development are needed before they are commercially available as alternatives to lithium-ion batteries.
Lithium in the futureChile also recently announced a new lithium strategy, whereby projects with strategic value must allocate a majority stake to the state. Companies active in Chile, the world's largest lithium producer, fell sharply in share price (SQM -14%, Albemarle -16%). This came on top of the correction in the lithium price of some 70% since late 2022, following the massive bull market from early 2021.
With the Chilean nationalizations, concerns about possible future lithium shortages are further heightened. This actually increases the valuation of new lithium discoveries outside Chile. Therefore, we see this action as positive for lithium markets, which are still in the early stages of development. If the world continues to push hard for new energy sources, and with this political agenda, it is certain to do so, the demand for lithium will continue to grow strongly in the coming years.
The International Energy Agency (IEA) predicts that the lithium market will be worth $200 billion by 2030, up from just $1 billion in 2010. Based on the climate goals from the Paris Climate Agreement, demand for lithium would increase by 4000% between 2020 and 2040. This while supply is limited, and setting up a new lithium mine takes many years.
In shortLithium is a versatile and valuable element that has revolutionized the way we power our modern world. As demand for renewable energy and electric vehicles continues to grow, lithium's role in our society is likely to become even more important in the coming years.
We at the Commodity Discovery Fund, see the demand for good lithium projects growing in the coming years. In doing so, the limited supply of good projects cannot meet the growing demand from the "green revolution. The nationalizations in Chile (the world's largest producer) do not help either. For these reasons, we are using the current correction to build positions in the right companies and continue to expand our exposure to "white gold." More info on the ratios within our portfolio can be found on the Portfolio page and in our brochure.
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