This is the context in which to judge the hype around lithium. The price of lithium will rise as demand for electric vehicles and the batteries that power them increases. But there is a limit. We do not yet know how much extra lithium can be produced. The competition for known existing resources suggests there are serious constraints. If that is so lithium will become more expensive to the point at which its cost becomes a barrier and a constraint on electric vehicle sales. That in turn can only hasten the process of substitution – the development of materials that can displace lithium in batteries. Markets always have ceilings set by the ability and willingness of consumers to pay what is being asked, and by ever advancing technology. Petrol is a prime example of a product that keeps selling in vast quantities because it is readily available and its price is not too high. At the moment lithium is one of the very few commodities for which there is an increase in price. The existing owners are no doubt dining out on the increased economic rents they are collecting. They should enjoy the good times while they last.
FT 25th April 2016 read more »