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I really, really like lithium batteries,
but… - Lithium’s supply problem
- A “lead-ing” indicator
Today’s article is
not about lithium -but any conversation about batteries should include a tip
of the hat to lithium. I wrote about lithium two
weeks ago, and I mentioned why it’s so great for batteries. There are
lots of highly technical reasons, but they mostly boil down to two main
reasons:
1. It’s the lightest metal, so it’s great for just about
every battery application where weight is a practical consideration, namely
in mobile devices
2. Somewhat related, it has the highest electric charge
capacity per size and weight of any substance known to man.
But unfortunately, I just can’t get as excited about the
investment implications for lithium, the commodity, as I am about the battery
technology – which lets me run my cell-phone and lap-top without using the
much heavier lead-acid variety.
You can read all about lithium in a report from United
States Geological Survey by
clicking here.
There’s plenty of demand for lithium, not just in batteries,
but in ceramics, glass, and aluminum alloys. But I’m avoiding lithium miners
because of the supply: there’s plenty of it.
According to the
USGS, there are about 9.9 million metric tons of known lithium
reserves.
The world barely uses 30,000 metric tons annually. Most
lithium mined today comes from salt flats in South America. But lithium is
such a hot-topic today that more and more producers are flooding the
marketplace. Again, according to the USGS:
“Many claims in Nevada, as well as in
Argentina, Australia, Bolivia, and Canada, have been leased or
staked.”
Compare lithium to my favorite battery commodity: lead – one
of the least popular elements on the periodic table. New lithium miners pop
up every day thanks to cheerleader Senators like Nevada’s Harry Reid – but
when was the last time you saw Nancy Pelosi cutting a red ribbon for a
lead-mine?
And sure, lithium is a great battery technology, but lead
isn’t going anywhere…
Lead-acid batteries are in just about every car manufactured
today. With automobile growth in China and India absolutely booming, every
new car means one more lead-acid battery.
Lead is the cheapest, most reliable and for many
applications, the most cost-effective material for batteries.
I just bought a new lead-acid battery for my Jeep at
Wal-Mart (NYSE: WMT) a few weeks ago – it cost a total of
$80 for the battery plus installation.
Compare that to the Chevy Volt’s lithium battery, which has
a price tag of about $8,000.
I know it’s a bit of apples and oranges since the Volt’s
battery is much larger, and it’s used to power the car, but if you break down
lithium batteries by their price to kilo-watt hour, lead-acid is much, much
cheaper.
And today, most production actually comes from recycled
batteries. Very little lead is mined every year – but that dynamic has to
change as more Chinese and Indian cars hit the roads.
They’re not going to be buying the $100,000 Tesla roadster
or even the $30,000 Chevy Volt. They’ll buy the $2,500 Tata.
According to Isidor Buchmann, a CEO of battery manufacturer
Cadex Electronics, lead-acid batteries are “20-fold” cheaper than lithium
batteries.
So… to wrap this up…lithium is: more expensive, more
popular and there’s plenty of supply.
Lead is: cheap,
unpopular and the supply is mostly limited to recycling.
Two weeks ago I said to buy mining giant BHP Billiton (NYSE:
BHP). They’re in Australia, which is the world’s largest lead producer. Most
of the lead they mine will go into Chinese and Indian car batteries.
I love this company under $65, but I think it’s safe to
nibble at prices under $70 a share. If you have any questions or comments,
please drop me a line at [email protected]
Good investing,
Kevin McElroy
Editor
Resource Prospector