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I am a professional finance blogger and investor in the Lithium mining and battery manufacturer sector. My website, the Lithium Report provides the latest news, trends, and stories for this emerging industry that has much potential to ignite and electrify the world. We focus on providing a... More
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  • Where are we in the Lithium Cycle these days?

    Hope everyone is enjoying their summers.  With the stock market putting pressure on lithium battery manufacturing and mining sectors (and many other sectors across the board), I thought about going away myself, after seeing the recent charts that put many of the leading companies to drag from summer downward market activity as well as lower trading volumes.  Among the leaders in the lithium industry, bearish signs were definitely affecting many of the leading stocks in the industry.

    downward pressure Where are we in the Lithium Cycle these days?

    Whether your talking about A123 Systems, Ener1 Inc., Valence Technology, Electrovaya, or some of the mining juniors including Talison Lithium, Orocobre limited, Canada Lithium Corp., and Lithium Americas.  You can see their stock charts and noticed that they have all been under some type of downward pressure during the first half of 2011.  Have there been disappointments based on the share prices being stagnant over the last few months?  Definitely,  most are probably in agreement of that.  Can we expect a better second half of 2011 for these stocks?  I’d like to think so.  If history teaches us anything, I believe that the second half of 2011 should give these industries a boost especially if we start to experience higher than normal energy prices of $120+ barrel of oil.

    So that brings us to another question, where are we in the lithium cycle?  looking at the sector, and seeing that many of the companies in the battery development and manufacturing firms in the US still are relying on government grants and funding to stay in business,  along with seeing that energy prices at the gas pump are still at a moderate level, I believe we may still be in the second or third inning of this game.  Meaning both sectors have not really broken out yet or even emerged to the investment or mainstream community.  One interesting observation I by looking at stocks in both the battery mining and mining sector, is that one is dominated in the NASDAQ exchange while the mining companies are listed on the Toronto Stock Exchange.  Ofcourse, one can understand why companies have chosen to list on their respective exchanges (believed that TSX is more suitable for resource companies).  But one think I’d look forward to is to see some of these lithium mining companies cross the bridge and get better investment exchange by listing on a major exchange.

    Are we starting to see some greater coverage in the sector?  I am encouraged to say I’m starting to notice that.  For example, one news report that I saw this morning was investment coverage linking global agricultural companies who are mainly producing Potash and boosting their stocks because they have upside with lithium. In this video, they promoted SQM for their business in Potash and lithium.

    So this brings us to another question.  Can we see more coverage in this sector when we face higher oil prices as many economists have predicted to occur in the coming 12 months?  I hope so.  If that’s what it takes to bring this sector up and running and emerge as a sector to invest in, then it definitely can be seen as an opportunity for many of these companies in this space to utilize an environment with higher oil prices to better promote their companies to shareholders as a solution to a widespread problem.

    Jul 27 1:56 PM | Link | Comment!
  • What would an OPEC-like lithium cartel possibly mean?

    With recent mention of Argentina promoting the idea of an OPEC-like cartel to control the supply and pricing of lithium this week, what exactly would that mean?

    Rodolfo Tecchi, director of technology and science promotion of the Argentine Ministry Science and Technology recently quoted that “In the near future  and with our production at such a high level, Bolivia, Argentina, and Chile will control the lithium market”.  He added “They could do it with a sort of OPEC-like arrangement”.

    Forbes recently ran an article describing these 3 countries are considered the “Saudi Arabia of lithium” with the major benefit of controlling mechanisms for the sale of lithium carbonate and avoiding the lower prices that may come with overproduction.  In fact, Bolivia has about 50 percent of the global reserves, Chile controls about 25 percent, and Argentina having approximately 10 percent in its possession.

    It’s true that these three countries in particular if ever combined as a cartel would have an enormous amount control on who to sell to, how it’s distributed, and at what price.  Three important aspects when a near monopoly is created.  But what exactly is the motivation behind this talk?

    For one, It’s definitely to further generate interest and investment in the area of South America for business in these countries.  Governments in the area recognize their own domestic resources and have a mission to further grow their key industries and need for lithium to allow their businesses and more importantly, their community, and GDP to grow long term.

    With greater eyes and ears drawn to this sector, you can bet that more funding towards mining operations and related investments would be among its main intentions.  However, the more important matter is the drive to centralize and develop a known market pricing structure for lithium from a global supply and demand viewpoint.  Similar to how oil, uranium, and other commodities have a global market price, this would essentially drive the price per tonne and develop a better structure of higher margins for those already in the mining business.  Existing producers are also very much in favor of this, as it would increase their profit margins.

    It is definitely a realistic future possibility as these countries and their deposits are known to be rich in lithium and are close proximity to each other, just like OPEC is closely aligned in the middle east.  However, at this point in time when both, the lithium mining companies and battery manufacturing companies are still trying to develop its core business to a respective level, some are still relying on its loans and funding.  Investments still need to be made and materialized as demand for lithium continues to grow worldwide.

    But one should question if such a cartel could control the supply of lithium in the long term as more junior companies ramp up and go into commercial production, especially in the second half of this decade.  TRU group earlier in the year warned of a possible oversupply of lithium by 2017 especially as many juniors try to accelerate into commercial production.  End users who do not want to be controlled by paying higher prices for lithium could also turn to partnerships with mining companies through joint ventures.

    By witnessing in recent history how America relies on imported foreign oil, and how China similarly controls the amount of exports of rare earth elements that are critical to many applications to the rest of the, these actions can have their fair share of risks.  U.S. President Obama also recently expressed no interest in transitioning from importing oil from the OPEC cartel in the middle east and trading it to only answer to another new cartel in South America for lithium.

    However, the main reason for talk about a possible cartel is known to benefit all parties involved in the business, as higher prices typically translate to higher profit margins, contribution to local communities and governments.

    Jul 08 8:22 PM | Link | Comment!
  • What would it take to accelerate the adoption of Electric Vehicles?
    I was closely examining activity in China on how the accelerated activity in electric cars was going so far.  I would have thought that regardless of whatever happens, we can surely expect Chinese auto sales to take off, especially for Electric Vehicles in particular as the governmnet has been putting greater investment in these strategic industries in recent years.  Despite the best of intentions by the Chinese, there still seems to be resistance by the public in China to invest in Electric cars?  Why?

    The vehicle purchase price is still relatively higher compared to conventional vehicles.  How much higher?  could be at least one and a half to two times compared to the price of a regular car.  However, the Chinese government has already committed billions to subsidize the purchase of Electric cars.  In fact, some districts allow you to bypass the need to  obtain a permit if you’re going to purchase an electric car.  So this would make price less of an issue.  Perhaps there’s more than just price?

    What maybe more of an issue are the lack of charging stations. Despite plans to build the infrastructure, the work is still ongoing.  Citizens are afraid to run out of power without efficient access to charging stations.  If this is the case, perhaps it would be a very good idea to invest in producing electric vehicles that still have  a reserve tank of fuel, such as the Chevy Volt.  However, it is evident that governments in global markets are working very hard towards developing the charging stations and networks for the future.  You can imagine it takes much time and money to develop each piece of infrastructure.  You’ll see one example of a charging station run by Petrobras and using solar energy below in Rio de Janeiro, Brazil.

    So with this resistance even in China, what would it take to accelerate the adoption rate in Electric vehicles?  Interestingly, I came across some stories in China whereby ideas have been brought out that governments would go as far as to hire celebrities and famous people to help endorse electric vehicles to consumers.  Other ideas include having dedicated bus lanes to be allowed to be used by electric vehicles.  In fact, that is also the case with bike lanes, whereby electric mopeds and e-bikes could also better utilize these same lanes.  The idea would be to show people in China that there is much reward and much to gain if adopting to electric vehicles at this early stage.

     

    So back to answer our original question, what would it take to accelerate the adoption of electric cars?  even in China?  How about this simple answer: it just requires…Time.  Specifically, a little time to allow companies to develop better battery technologies which deliver better range (which is already well in progress), time for consumers to go through an upcoming era of over $150  per barrel in the future, time for companies and governments to develop a half decent network of EV charging stations, and most importantly time to just allow consumers to evolve and decide to consider the idea of an electric vehicle that would benefit them more in the future.  Some things just require activity to play out over time.

     

    Jun 15 2:18 AM | Link | Comment!
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