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Albemarle: Best Lithium Investment Right Now

Summary

Lithium is probably the hottest specialty metal these days.

Even though demand for lithium rises, there is no tradable security on lithium in the major exchanges.

TSLA, LIT, SQM, and FMC have their flaws as proxy investments for lithium.

ALB seems like the right candidate to capture the lithium growth.

The bull case for lithium has been around for a while and is based on lithium's primary role in rechargeable batteries and the expected growth in solar power usage and consumer electronic devices sales, as well as the electric vehicles market boom. The biggest driver behind the expected growth in lithium demand is the expected rise in electric vehicles that use much more lithium carbonate equivalent in their batteries than other usages, as shown in the table below:

Application

Lithium Carbonate Content

Cell Phone

3 grams / 0.1 oz

Notebook

30 grams / 1.0 oz

Power Tool

30 - 40 grams / 1.0 - 1.4 oz

Hybrid ('HEV') 3kWh

1.58 Kg / 3.5 lbs

Plug-in Hybrid ('PHEV')

11.28 Kg / 26 lbs

Battery Electrical Vehicle ('BEV')

19.95 Kg / 44 lbs

Tesla 85 kWh

50.8 Kg / 112 lbs

Source: Albemarle Global Lithium Market Outlook, March 2016

According to a Goldman Sachs report, the electrical vehicles market share is expected to reach 25% of the total auto market in 2025, up from only 3% today, when the vast majority will be hybrid cars, as shown in the chart below. According to the bank's auto research team, every 1% increase in BEV penetration would increase lithium demand by 70,000mt of LCE/year, which is half of the current global demand for lithium.

Unlike the common belief, the growth of the electric vehicles market is not based solely on Tesla (NASDAQ:TSLA) but also on EV offerings from other automakers like Toyota (NYSE:TM), Ford (NYSE:F), Nissan (OTCPK:NSANY), General Motors (NYSE:GM), and others. However, the contribution of Tesla and its Gigafactory to the buzz of the EV market and potential drop in battery costs could...


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