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Lithium is entering its fourth year in what is widely expected to be a ten-year investment cycle to create an electric vehicle (EV) blueprint for the 21st Century.
Major investment to date has come from inside the lithium industry and professional investors, but we are now at a point where new players from the oil, energy and auto industries will begin to take action.
In November 2014 and December 2015, Benchmark Mineral Intelligence published these simple charts below to highlight the beginning of a mega-trend.
Presented in private meetings and on the Benchmark World Tour, it was the first time lithium and lithium ion batteries were discussed as the lynchpin that holds together the futures for three multi-trillion dollar industries: oil, energy/utilities and auto.
It has taken four years to reach a point where EV demand is not only getting stronger but energy storage potential has also become a reality.
With concrete demand numbers and enough confidence in battery producers’ and auto makers’ timelines, the lithium story has gathered pace and reached a new phase in its development to become a mainstream speciality chemical.
The lithium story is now accepted by all sectors, investors and commentators alike with the discussion focusing on the rate of growth rather and how big the industry could become by 2030.
While 2030 may seem like long-term, if you are an oil producer, auto maker or in the utilities business, this falls within the short-to-medium term category. And while major actors in these industries have been circling for some time, 2019 could well be the year where big decisions are made.
Internal lithium M&A to continue, lower asset valuations to drive deal-making
You can also still expect M&A activity from within the lithium space and with it high profile successes and failures that come with the territory and risk of building the lithium supply chain at a pace that has never been experienced before.
Difficulty meeting even preliminary expansions targets for many, means industry majors will continue to commit to new resources and conversion facilities to ensure their place as market leaders.
This is likely to see more partnerships between development stage lithium companies and major lithium producers as they look to lock in leading assets, particularly if even bigger outsiders from the oil, auto or energy industries are circling and with equity market pressures allowing for more favourable valuations.
It is Benchmark Mineral Intelligence’s belief that 2015-2018 was phase one in building a lithium-to-EV supply chain for the 21st Century.
This was a period where junior or development stage lithium companies and Tesla had believed big and convinced the bigger chemical producers and Auto makers that the EV story was real and happening faster than expected.
The dream became a bigger reality than foreseen and the lithium industry has since proven its ability to react in the short term. It has also proven that it could handle a jump in the compound annual growth trajectory from 6-8% a year in a pre-2014 world to 22-26% a year in a post-2016 world.
We are now in phase two of lithium’s journey from niche to mainstream where the big fish are no longer SQM, Ganfeng Lithium, Albemarle and Tianqi, but Shell, BP, Saudi Aramco, VW, Toyota and General Motors.
A brave new world.
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