Are Lithium Juniors Better Risk-Adjusted Investments Than The Big 3?

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As We’ve all Heard, Lithium Demand Poised to Take Off

Investors are aware of the growing need for the metal lithium in automobiles & large-scale energy storage of renewables such as wind & solar. But few may realize that lithium-ion batteries are also key in portable dog showers. Does this represent a, “tipping point?” Perhaps a tipping point for the dogs! The main uses of lithium in 2014 were ceramics and batteries. [see pie chart]. However, the “other” slice of the pie represented just 10%. No one mentions the “other” category because there’s no blockbuster products in it. Notice that large-scale storage does not have its own slice of the pie. I think at the very least, 41% of the pie will grow at a CAGR of at least ~15% (see quote below).

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The incremental uses of lithium-ion batteries in power tools, vacuum cleaners, cell phones, lap tops, dog showers, etc, etc. products in the, “other” category, will be ongoing for years and years to come. I think the, “other” category will become a more meaningful slice of the lithium pie. And let’s not forget electric bikes, of which there are 200 million, yes million, in China alone. Why does China dominate the electric bike market globally? For one, Chinese air pollution is a terribly embarrassing problem for China’s leading officials. Assuming the lithium in 350 electric bikes equals that of the average EV, that equates to the equivalent of about 600,000 EV’s.

Are Pundits Factoring in All of the Potential Demand Factors?

Finally, I point to hybrid p-EVs, (plug-in hybrids) there’s a growing number of them… In a few short years there will be less hybrids coming off the assembly lines, replaced with 100% EVs. I’m not sure how that presumption on my part factors into the demand picture. Plig-in hybrids on average use roughly 1/3 the amount of lithium as full EVs. Another angle not appreciated is the replacement of lithium-ion battery packs in existing EVs and bikes. Aside from Tesla, most EVs will need replacement battery packs after 5-10 years. Replacements could add significantly to overall demand for lithium.

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Disclosure: I have no prior or existing relationship with any company mentioned in this article. 

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