Spiking Lithium Prices Could Dent Tesla’s Profits

Lithium mining (Dado Galdieri / Associated Press)
Dado Galdieri / Associated Press
Newport Beach, CA

Despite huge push-back Breitbart News received for warning April 1 that spiking lithium price inflation could seriously damage or destroy Tesla Motors, Inc.’s business model, Goldman Sachs has declared a new bull market in lithium, reflecting rising prices.

On April 11, the International Monetary Fund (IMF) cut international growth expectations on concerns about spreading commodity price deflation. But after a decade of flat prices, the value of lithium carbonate has spiked from $6,000 a metric tonne to almost $14,000 a tonne over the last six months.

Breitbart News believes that the price boom is the result of speculation on the impact of Tesla’s $5 billion Gigafactory rising in the Nevada desert, which will soon be building enough subsidized lithium-ion battery powered vehicles and industrial-scale electric grid storage systems to consume more lithium than the international mining industry can possibly produce at current prices.

That is why Goldman Sachs’ latest Emerging Market Radar report claims that “Lithium is the New Gasoline”:

Lithium is the lightest solid element on earth with double the energy density of the next closest alternative; it is also one of the most abundant elements on earth. These unique properties ideally position it for portable energy storage applications that will be a key enabler of the electric car revolution and replace gasoline as the primary source of transportation fuel.

Goldman predicts that the electric vehicle industry will grow by 1,100 percent over the next nine years: “…thanks to technology breakthroughs, favorable policy and supportive public opinion, electric vehicles (EVs) appear poised for a sustained period of superior growth with our autos team estimating 22% EV penetration in 2025 from under 3% today.”

Current worldwide lithium carbonate mining capacity to power cell phones, laptops, other devices and electric vehicles is about 160,000 metric tonnes. But given that a ”TSLA model S with a 70kWh battery uses 63 kilograms – an equivalent content of more than 10,000 cell phones,” Goldman expects lithium demand will skyrocket to 470,000 metric tonnes by 2025.

The beauty for Goldman speculators is that proven worldwide lithium production capacity is woefully inadequate. They believe: “Similar to oil, more lithium deposits will become economical at higher prices (i.e. there is a steep cost curve) to serve new demand.”

Goldman Sachs does acknowledge that the key to its forecast is “favorable [government] policy including tax credits have aided the adoption of EVs, as have pollution regulations such as caps on carbon emissions and CAFÉ standards.” But with Goldman expected to top its $8,563,607 in 2012 contributions in the 2016 election cycle, it seems confident that no matter whether a Republican or Democrat controls the White House or Congress, “sustainable” subsidies will continue to drive the value of lithium much higher.

Over the last two weeks, Tesla has taken in $350 million in deposits at fixed prices on delivery of 350,000 Model 3 vehicles starting in late 2017. But with Goldman Sachs intent on pushing the price of lithium carbonate substantially higher, Tesla’s profitability must be squeezed already.