High on Lithium

June 09, 2022 | Rodrigo De La Peña Alanis, Associate Research Analyst

Electric vehicle (EV) sales have seen significant growth over the past several years. Recently, elevated demand has contributed to a rampant increase in lithium prices, a primary input to the batteries that power EVs. As the global transition to a clean energy economy continues, the demand for lithium is expected to rise exponentially, to the point of creating a supply shortage in the coming years. While the metal itself is not in short supply, there are limitations to the extraction process and investment in the space has yet to catch up with the rise in demand.

In the last two years, lithium prices have soared more than 700% as sales of EVs have hit record-breaking numbers. Demand for lithium, according to McKinsey & Co., is expected to increase more than sixfold to 3.3 million metric tons in 2030 from 0.54 million metric tons in 2021. Supply is currently projected to reach 2.7 million metric tons by 2030, leaving 0.64 million in demand unaccounted for. The lithium mining industry today resembles an oligopoly, with only a handful of companies responsible for the majority of global supply. Going forward, this could change as further investment is made into the space, which could in turn help normalize price levels. While mining is often thought of as the polar opposite of sustainability, lithium mining actually helps further green energy initiatives, and lithium-related investments may serve ESG-focused investors well over time.

Print PDF > High on Lithium

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Rodrigo De La Peña Alanis
Associate Research Analyst

Get to Know Rodrigo

Related Content

01.25.2023

2023 Market Preview: Trail Guide to 2023 Asset Class Performance

As winter takes hold in the northern hemisphere, there are those that choose to escape to warmer climates and those…

01.05.2023

2023 Market Preview Video

This video is a recording of a live webinar held January 19 by Marquette’s research team, featuring in-depth analysis of…

01.24.2023

Things Are Looking Up: Good News for China

China has been a hot topic over the last year amid market-moving headlines and heightened stock market volatility. U.S.-China geopolitical…

Two-line chart showing U.S. banks tightening lending standards over several periods. Chart subtitle:  A significant portion of domestic banks have tightened lending standards given the uncertain economic outlook. Chart visual description: Data is quarterly and through 4Q22. Y-axis is labeled “Net Percentage of Domestic Banks Tightening Standards,” and ranges from -40% to +100%. X-axis is labeled with quarters in 10-quarter increments, beginning in 2Q90, then 4Q92, 2Q95, and so on through 4Q22. Two data series are charted with lines, and recessionary periods are shaded with light blue behind them. First data series is named, “Commercial/Industrial Loans to Large and Middle-Market Firms” and is charted with dark green line. Second series, “Commercial/Industrial Loans to Small Firms,” is charted in bright green. Chart data description: Leading up to recessionary periods, (four plotted; 3Q90-2Q91, 2Q01-4Q01, 1Q08-3Q09, and 1Q-2Q20) more banks tightened lending standards, with the peak typically near the middle of the recession. Generally, in between, fewer tightened to the point of negative data (or decreasing standards) until the next ramp-up to recession. Peak for Large/Middle line was in 4Q08 with 83.6%; peak for Small line was same quarter at 74.5%. The 4Q22 point was at 39.1% and 31.8%, respectively. Chart source: Source: Federal Reserve Bank of St. Louis as of December 31, 2022. Large and middle-market firms are those with annual sales of $50 million or more, and small firms are those with annual sales of less than $50 million. End chart description. See disclosures at end of document.

01.17.2023

Banks to Borrowers: Tighter, Tighter

If recent data points collected by the Federal Reserve are any indication, major financial institutions are bracing for a period…

Combination column and line chart showing annual private equity deal activity in professional sports companies. Chart subtitle: Global private equity investment in professional sports has increased due to attractive investment characteristics. Chart visual description: Data is annual, with 2022 asterisked to note as of August 2022. Left y-axis is labeled Deal Value ($B) and spans $0-7B. Right y-axis is labeled Deal count and ranges from 0 to 60. X-axis is labeled with years from 2014 to 2022. Deal value data corresponds to tan columns. Deal count data is charted with a blue line. Chart data description: By year, 2014 had $0.5B and 17 deals; 2015 had $5B and 29 deals; 2016 $0.6B and 21 deals; 2017 $4B in 43 deals; 2018 $1.7B in 25 deals; 2019 $3.2B in 24 deals; 2020 $1B in 37 deals; 2021 $6.3B in 53 deals; 2022* $6.2B in 21 deals. Chart source: Pitchbook *as of August 2022. End chart description. See disclosures at end of document.

01.11.2023

Pitch Perfect, Slam Dunk?

Some of the key hallmarks of an attractive private equity deal include businesses with a loyal and diversified customer base,…

Two-line chart comparing gasoline prices and CPI month over month. Chart subtitle: Macroeconomic shocks tend to drive up the correlation between gasoline and overall CPI. Chart visual description: All data monthly. Left y-axis is labeled Gasoline ($/gallon) and ranges from $0 to $6. X-axis spans dates from December 2006 through December 2022, with labels at 6-month increments, thus alternating June to December. Right y-axis is labeled CPI Month/Month and spans -2.0% to +1.5%, with 0.5% increments. X-axis crosses 0 for gasoline price y-axis and -2.0% for CPI y-axis. Slate line plots Gasoline Price; dark teal line plots CPI M/M. Green dotted arrows highlight Strong Positive Correlation over several periods. Chart data description: For period shown, gasoline prices peaked in June of 2022 at $4.93 per gallon. The next most recent peak outside 2022 was in April 2012 at $3.90 and the next closest peak was in July 2008 at $4.06. Prices have generally increased since 2020, though between June and December this year they have receded. Month-over-month CPI generally has hovered between -0.5% and +0.5% but the two tend to move similarly amid more intense economic turbulence. Chart source: Bloomberg, Federal Reserve Bank of St. Louis as of December 31, 2022. End chart description. See disclosures at end of document.

01.04.2023

Fueling Some Relief into the New Year

Last summer, gasoline prices retreating was one of the first bright spots at the macroeconomic level. Since then, CPI has…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >