The following article is written by Michael Glennon, a portfolio manager at Glennon Capital.
Technological advances in batteries that allow them to store more energy, in a smaller physical size, are pushing us towards greener alternatives to burning fossil fuels. Batteries are making a comeback and are set to become a more important part of the energy landscape.
Tesla is making affordable battery powered cars and other manufactures have already signalled their intent to do the same, while home battery storage is supporting the spread of renewable energy.
The key material allowing batteries to become smaller and more efficient is lithium. Historically the problem with batteries was size and weight; this made them impractical for many uses. Lithium has allowed batteries to become smaller, lighter and more efficient. Additionally, the use of lithium in batteries allows them to be recharged more efficiently, further increasing their range of applications.
Remember these?
Gone are the days of heavy batteries
The increased demand for lithium has meant that the price of lithium carbonate has increased by a huge 96.2% over the past year. Consumption is forecast to grow at 11% per annum for the next few years with the main driver of growth being rechargeable batteries; of that batteries for cars are expected to grow at 27% per annum until 2025
Australia is currently the largest producer of lithium. This has meant that there has been a rush towards investment in the few listed companies that are current or prospective lithium producers. Of note is Pilbara Minerals (ASX: PLS), which has increased from 4.5 cents just 18 months ago to 63 cents recently. The business has yet to produce any lithium.
While lithium is up oil is down. It's 'Peak Lithium' and the sky is the limit. But as with oil, the supply side response is coming; longer term the perceived lithium shortage will be met by supply and prices will be capped. The question is when.
Michael Glennon is a Portfolio Manager at Glennon Capital.
Neither the author, Michael Glennon, or Glennon Capital has any interest in securities mentioned above. This article is intended for general use only. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information herein. Past performance is no guarantee of future returns.
