Is This The Biggest Commodity Story Of 2016?

Lithium saw its price triple in 2016, and cobalt—another massively important element in the lithium-ion battery—rose almost 50 percent in the same year, and is poised to become the next critical metal as the world sits on the edge of an energy revolution driven by mainstream electric vehicles, battery gigafactories and power walls.

Together, lithium and cobalt are the most alluring investment duo on the global market, and we’re only getting started. Supply is expected to be short, prices are expected to spike, and small-cap explorers are expected to emerge as key players as they secure new prospects from the U.S. state of Nevada, to Latin America’s ‘Lithium Triangle, to Ontario.

Against this dramatic backdrop, the strategic advantage is brilliant for new explorers like LiCo Energy Metals (TSX:LIC.V; OTCQB:WCTXF), which is targeting both of these critical commodities.

The lithium-ion batteries that are essential to the market-disrupting energy picture actually use more cobalt than lithium by weight, which means that ambitious plans to pump out volumes of EVs to meet growing mainstream demand all over the world could be at risk if new supplies are not secured.

Lithium Spot Prices Tripled in 2016, and Cobalt is Set to Rise Next

Commodities prices have been falling pretty much across the board, and particularly since the oil-price rout that began in the summer of 2014—but not lithium. In the past year, lithium spot prices have tripled, driven by growing demand for lithium-ion batteries and expected future demand. For November, 99.5 percent lithium carbonate China spot prices rose 0.15 percent, and stabilized at around US$18,000/tonne.

Cobalt spot prices increased 46 percent in 2016 thanks to growing demand and tight supply that has in part come about because of flat copper and nickel markets, and cobalt has largely been mined as a by-product of these two metals. In February 2016, cobalt was at US$10/lb, but by the middle of December it was over US$14.60/lb.

And current prices are further supported by temporary shutdowns at key mines. But it all means we’re looking at a deficit already in 2017, so it’s a tight market that can continue to support a jump in prices.

Most of the world’s cobalt supply comes from the Democratic Republic of Congo (DRC), and there is a problem meeting demand with or without the coming surge in battery demand. At the same time, supply from chaotic and unstable DRC is always uncertain. The race to secure cobalt supply chains is in full force.

Demand Set to Overflow

Between 2005 and 2015, global output rose by 20 percent – however, 2015 total demand only saw a small portion of the total coming from batteries. As more high quality lithium is needed for batteries, lithium demand will overflow in the coming years.

The 2016 surge in spot prices in China coupled with the ravaging hunger for lithium batteries and power storage solutions has triggered fears that we are on the edge of a major supply problem—but it’s a euphoric problem for lithium exploration companies and it has opened up the playing field to new entrants.

Tesla has stormed the mainstream U.S. market with its newest model; EVs have already entered the profit stage in Norway, and will soon be followed by the Netherlands, helped out by some EV-market-loving laws that demand that every single car in the country be electric by 2025. In Asia, too, EVs are bursting the traditional car bubble.

Volkswagen (OTCPK:VLKAY) is sure that a whopping 25 percent of its car sales by 2025 will be EVs, and the World Energy Council expects 1 in 6 cars sold in 2020 will be EVs. Finally, according to Bloomberg, by 2022 EVs will be cheaper than that natural gas brethren.

And with a mind-boggling 12 battery gigafactories on the books globally, we’re looking at a supply and demand equation that is overwhelming in favor of the new lithium miner. It’s not only Tesla: LG Chem (OTC:LGCEY, Foxconn, BYD (OCTPK:BYDDY) and Boston Power are all building new battery factories, too—among others. Imagine the manufacturing capacity here that requires monumental amounts of lithium and cobalt that we simply won’t have.

In 2015, the battery industry accounted for 35 percent of global lithium demand, according to the United States Geological Survey (USGS). More to the point, this industry bought 11,375 tonnes of refined lithium. Then we have cobalt, which is even more astonishing, considering that the battery gigafactories aren’t even online yet. According to the Cobalt Development Institute (CDI), the battery industry represented 41 percent of global cobalt demand in 2015, or about 40,600 tonnes.


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