Hedge Against Short-Term Cycles with Lithium: Daniela Desormeaux

The Mining Report: Economic growth rates have diverged this year. They’re increasing in the U.S. and slowing down in China and India. They’re stagnating in Europe, and Russia is going into recession. How is all that affecting the lithium space?

Daniela Desormeaux: The lithium industry is growing quickly. It is different from commodities like copper or iron ore in that there is not a direct link between lithium and the economic cycle. Last year, most commodity prices were down, and the most important drop was in iron ore. The lithium industry, on the other hand, grew 5–6% last year.

Galaxy Resources Ltd. has sold its Jiangsu lithium plant for $230M to focus on its Argentina and Australia projects.

This difference between lithium and other commodities exists because there is still room for new lithium applications. The lithium industry’s growth is higher than the growth rate of the global economy. Of course, if China grows slower than expected, it will affect the consumption of lithium, but this impact should be marginal compared with the impact that China has on the other commodities.

There are many lithium applications that are in the early stages of development. So despite this divergent scenario, the lithium industry will grow at a very interesting rate.

TMR: The economic difficulties of some countries are not affecting lithium demand that much?

DD: I would say that they affect it, but with some lithium applications still in development, demand is going to grow.

One of the main applications is batteries. We see that in the automotive industry; although these applications are very sensitive to the economic cycle, the industry is working on a long-term horizon. For electric cars batteries, for example, Tesla Motors Inc. (TSLA:NASDAQ) announced that total demand just for Tesla cars will be about half of Australia’s lithium production …read more

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