Demand for Lithium

For those of you that follow the Warren Buffet principles of counter cyclical investment it is always important to watch emerging trend-changes in Australian property markets.  Economic indicator changes always precede real estate data.  We watch dominant economic sectors in each state, territory or region looking for changes in trends and then we seek to assess their depth and duration to appreciate the impact they will have on the property market.

Western Australia was the wonder state in the mining boom and is now widely held to be at the bottom of its cycle. What is going to draw it out again?

Western Australia proudly calls itself the mining state and this has been the source of much of its wealth.  Gold prices have been their salvation with the price of this metal making many deposits profitable to extract. There is weekly news about new exploration or investment in mining.

However it is the next wave of so called life style metals that are of most interest.  Life style metals are those we need for our electronic world and include cobalt and lithium.  This is a story about lithium.

The world’s lithium reserves are in four dominant countries.  Chile with 7.5Mt, China with 3.2Mt, Argentina with 2Mt and Australia with 1.5Mt.  Australia is currently the world’s largest producer of lithium.

Demand is forecast to double, by the Deutsche Bank Markets Research, over the next 8 years.  The most recent increases in demand have been driven by Government Policy.  France announced it will ban the sale of new petrol powered car by 2040.  The UK has also announced they will no longer sell petrol powered cars by 2040.  This means we will need battery powered cars in large numbers sooner than may have been planned.   Current demand figures for lithium may be conservative.  However there are now concerns that the national power grid in the UK may not be able to manage the huge shift in demand.

If Government Policy continues to drive demand for lithium the figures from Deutsche Bank could be conservative.

“Currently, there are an estimated 80 different lithium-ion battery chemistries in production, with these varying chemistries all exhibiting different characteristics, such as capacity and voltage. Lithium is typically found in the cathode of the battery, commonly in the form of lithium cobalt oxide, while the electrolyte is commonly in the form of a lithium salt, such as LiPF6, LiBF4 or LiCLO4. The anode material is commonly carbon-based, with graphite being the most popular.”

Murdoch University ran a story this week about their research in this area.

I am watching the change in employment on page 3 of the attached report, it is shows employment rates are approaching the high of the recent mining boom.  This may be the confidence, fuelled by the demand for commodities from WA, that signals a change in trend for real estate prices.

I have included various references throughout the article and a great monthly resource from the Mike Thomas, the Senior Policy Officer: Markets and Economic Conditions, Strategic Policy in the Department of Jobs, Tourism, Science and Innovation.   You can write to him by email and request to be included on his email list to receive this report each month.