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| By Sean Brodrick |
We’re seeing positive action both in the price of lithium and in lithium miners.
Enough joy juice is flowing back into lithium stocks that certain market pundits are going all Doctor Frankenstein, shouting, “It’s alive! It’s alive” to anyone who will listen.
Not so fast. Hold your horses, Frau Blücher.
Sure, the Global X Lithium & Battery Tech ETF (LIT), a basket of lithium-leveraged stocks, has put in a bottom and is up more than 14% from its recent low.
But before we talk about buying lithium stocks, let’s talk about how we got here.
Why are lithium stocks tracked by LIT going up? Probably because the price of lithium itself has increased by about 12.4% since the beginning of the year. To be sure, lithium prices still remain down 80% from their cyclical peak.
On the bullish side, in February, Albemarle (ALB), the world’s largest producer, said that prices of the energy metal were “unsustainably low.”
A Boom … in Lithium Supply
On the bearish side, the reason lithium prices fell so hard is that supply shifted into higher gear.
In fact, according to Goldman Sachs (GS), this is just a bear market rally. The investment bank says we’ll see a surplus in lithium supply of 150,000 metric tons this year … and 336,000 metric tons in 2025.
We don’t know if Goldman is correct. I do know that new mines are coming online just as forecasts for EV sales in the U.S. are being lowered. EVs aren’t going away. But they aren’t selling as fast as people once thought.
I believe there is still plenty of room for growth in EVs, and this lowered sales forecast is just a hiccup. But I also believe that new supply could keep a lid on lithium prices, even if Albemarle says prices are too low.
And what about the longer-term view? Well, it turns out there is technology coming that could push lithium prices even lower.
AI Discovers Way to Reduce Lithium in Batteries
The BBC reports that Microsoft (MSFT), working with the Pacific Northwest National Laboratory — part of the U.S. Department of Energy — has discovered a new substance that could reduce lithium use in batteries by up to 70%.
What’s more, also thanks to artificial intelligence, the team came up with a working battery prototype in less than nine months.
Jason Zander, executive vice president of Strategic Missions and Technologies at Microsoft, told the BBC that one of the tech giant's missions was to "compress 250 years of scientific discovery into the next 25.”
If Microsoft can push this along fast enough, we’ll need a lot less lithium in batteries.
And that’s not all.
Bringing Old Dead Batteries Back to Life
One of the problems bedevilling the lithium industry is what to do with worn-out batteries. Now, a team of scientists backed by Toyota (TM) has made a major dent in the e-waste problem. It’s one that could keep batteries running for many years to come.
The researchers found that injecting specific chemicals into aging lithium-ion batteries replenishes the lost charged particles that help batteries store power.
Interesting Engineering reports:
“The researchers injected a special substance, called a recovery reagent, into the battery cells. This substance triggered a chemical reaction that produced more lithium ions and electrons, the two types of charged particles that enable a battery to store power. By adding more of these particles, the researchers were able to reverse the degradation of the battery and restore 80 percent of its original capacity. The restored battery also maintained its performance for 100 charging and discharging cycles.”
The Toyota research group has filed a patent application for their work, and now government agencies are getting interested.
These are two examples, but there is a BUNCH of new battery technologies in the works. Some of them cut down the use of lithium quite a bit. That’s the thing with new technology — there’s always the risk that an even better tech will come along.
In the short term, I expect we can see lithium and lithium-leveraged stocks continue to rally. But the longer term is very hard to predict. We might use more lithium … we might use a lot less. And there are a bunch of mines that could come into production if the price does go higher. More supply would weigh on the price.
For now, I think you can make more money in other investments.
If you do want to invest in the space, consider investing in companies that are coming up with solutions. I’ve mentioned that Microsoft and Toyota are both working on next-generation battery tech. Despite recent rallies, both stocks can be bought here.
The road to an EV future takes some surprising twists and turns. You have to be nimble to handle the big shifts. But there’s plenty of opportunity for profit as well.
All the best,
Sean
P.S. New technologies and AI changing the game for a certain energy resource might sound familiar. If not, then you might have missed what my colleague Chris Graebe just discovered. I urge you to check it out here.
