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Tesla Benefits From Local Contract As Lithium Price Sky Rockets

Tesla Gigafactory Feb 2016 [Source: Josh McDonald]

The price of lithium is sky rocketing worldwide as Telsa and other gear up to produce hundreds of thousands of electric cars and energy storage batteries in coming years.

The need for lithium to power the future has caused some to refer to lithium as “white petroleum” or the “new gasoline.” At present, the best lithium supply in the world is located in the Clayton Valley area of Nevada, about 3 hours away from the Tesla Gigafactory. Unlike other deposits, the lithium there is dissolved in salt brine, making it easier to extract and easier to process. But researchers at the University of Wyoming say they have discovered an enormous lithium deposit near the what is called the Rock Springs Uplift.

Tesla has been proactive about securing long term supplies of lithium to safeguard its battery production capabilities for up to 5 years. “In order to produce a half million cars per year…we would basically need to absorb the entire world’s lithium ion production,” Elon Musk said last year. But with demand increasing exponentially worldwide, it will need to pay close attention to its supply needs especially if it’s to build a half million vehicles a year.

Last year, Tesla struck a deal with Pure Energy Minerals, a company that is working to extract high quality lithium from the Clayton Valley area. Described as an “early stage agreement,” the agreement would allow Tesla to purchase an undisclosed amount of lithium at a “predetermined price that is below current market rates,” according to Fortune.

The rampant demand for lithium has attracted major players like Canada’s mining mogul Frank Giustra. “Frank likes to get involved in a project if he sees a massive shift in an industry’s fundamentals ,” Lithium X hairman Paul Matysek tells Oilprice.com. “Lithium is certainly showing all the right signs!”

Tesla is far from the only player in the lithium market. China is putting tremendous pressure on car makers to build electric and plug-in hybrid vehicles. Manufacturers around the world are racing to bring plug-in and electric cars to market.

The immutable laws of supply and demand are still in full force and effect. More demand is sending prices soaring. In China, the price of lithium carbonate doubled at the end of 2015 to $13,000 a ton. Since then, some companies have paid as much as $23,000 a ton on the spot market, according to The Economist.

Goldman Sachs predicts lithium demand will rise by 70,000 tons per year for every 1% rise in EV market share. It says the lithium market could triple in size by 2025 because of the increased number of electric vehicles.

Source: USA Today

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