Lithium is the 'new gasoline'

The rising demand for lithium is increasing its cost, but developments in the field are keeping battery prices low.

A Goldman Sachs analyst calls lithium the "new gasoline" in a recent report. Since the raw material is key to what has so far proven the most efficient means of storing energy, its value is set to grow as demand for batteries grows, primarily thanks to the growth of electric vehicles or EVs.

The Goldman Sachs autos team has projected that EVs will have 22 percent market penetration, from below 3 percent at present. Current requirement is 160,000 metric tons of lithium carbonate equivalent or LCE per year, according to the report, but a 1 percent increase in battery EVs could increase demand by 70,000 metric tons of LCE per year, or by nearly 44 percent.

One of the things driving EV acceptance will be the continuing decline in battery prices, which are projected to keep falling through 2020. The pace of adoption could quicken if gasoline rates rise dramatically at some point in the next decade. The EV market is very important to lithium demand because even as requirement will increase for common consumer devices such as smartphones, which use Li-ion batteries, a car battery needs much more of the commodity. A Tesla Model S with a 70kWh battery requires 63kg, according to Goldman Sachs, which is more than 10,000 cell phones.

The forecast decline of battery quotes, though, are not from the declining cost of lithium. A metric ton of lithium carbonate was $6,600 in 2014, from $5,180 in 2011. Economist Timothy Taylor outlines some of the other economic consequences of rising lithium battery demand:

1. Expanding the search for new sources of supply

2. Substitution from other uses of that mineral to where the demand is expanding, at least where it is cost-effective to make the switch

3. Expanded the recycling of the mineral

4. Expanded the search for alternatives to the mineral

The market for lithium may push up prices for lithium batteries, at least if no alternative is found. For the foreseeable future, though, such batteries are the technology of choice. While others are in development, none are as far along as lithium. Since battery rates are expected to continue to decline, as well, there will be little pressure to make a switchsoon.

See a comparison table of Li-ion battery suppliers on GlobalSources.com