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Meanwhile, lithium prices have traveled sideways recently. So the shares of lithium miners, developers and explorers have suffered a correction. As they often like to do, speculators are temporarily rushing out of a market simply because it’s no longer going up, up, up. They’re probably piling into Bitcoin.
Folks, nothing goes straight up (not even Bitcoin). A cooling off in the lithium market is just what the doctor ordered.
Look at these charts:
The chart on the left shows the prices of lithium hydroxide and lithium carbonate in Asia. Asia is the major buyer of lithium. Since the metal doesn’t trade on an exchange (yet), we have to use transactions in Asia to track it. You can see that 2016 and ’17 were rocket rides for the metal.
Again, nothing goes straight up.
On the right is a chart showing how lithium was consumed in 2016, the latest data reported. You can see that half of all global lithium consumption was used in energy storage. That’s all the batteries that go into electric vehicles (EVs), phones, grid storage, and other electronics. Importantly, while 50% of all lithium went to energy storage, that’s up from 30% just two years earlier. This makes for a tight market.
And going forward, what is the surge in energy storage going to do to lithium? I’ll tell you. Demand for lithium is projected to mushroom over 300% within eight years.
Where will all that lithium come from?
Indeed, the tight market is going to continue to squeak into 2018, according to Benchmark Minerals and other experts. Even as new mines come online. The mines simply can’t come online fast enough. It takes many years to find and develop a deposit. And there are risks all along the way.
So, what does this tell us about the recent pullback in the Global X Lithium & Battery Technology ETF (NYSE: LIT)? You know, the fund that holds a basket of companies that are all leveraged to lithium in all sorts of ways?
It tells us that pullback is a buying opportunity. We may not be at THE bottom. Year-end is not only the Christmas season … it’s shenanigans season for metals of all types. Funds and investors big and small rebalance, take tax losses or gains and so on. The metals markets, being small, can get pushed around.
But the bottom is close. The future for lithium is clear. And that is full throttle down when the next rally comes.
All the best,