Investors will find the most leverage in the energy market this autumn in…energy metals. Lithium, cobalt, vanadium were all niche metals for decades until cell phones and laptops hit critical mass, but now the demand is going vertical with large scale energy storage and Electric Vehicles (EVs). Mainstream metals nickel and copper will also benefit.
 
As usual, it’s not the abundance or scarcity of the metals in the ground that’s the issue, and I think that’s where many investors get sidetracked. Metal prices—and hence stock prices of the explorers & producers—are really more determined by permits. Staking permits, exploration permits, environmental permits, development permits, construction permits, production permits…you get the picture.
 
I think there is a legitimate, greater mainstream interest in the public to know more about how resource projects are built and their impacts on local communities and ecology ( I 100% agree). But there is also a political, anti-development part of society that is now very vocal, and powerful.
 
Both these groups are bullish for metal prices, as they either delay permits or help them get outright denied, keeping metal in the ground.
 
Lithium is a great example. Lithium is an abundant metal when you look at its prevalence in the earth’s crust. Mining, concentrating, and converting it to a form that an end user can inject into their existing supply chain is the key to value creation. And as the latest lithium boom began in January 2016, most ‘experts’ (I think ‘pundit’ would be a better word) thought the major producers would quickly bring on new supply and swamp the Market.
 
The reality however, 20 months later, is that lithium prices have stayed near recent highs, as everyone is now understanding that securing supply for the accelerating EV boom will be more difficult than we all thought back in 2016.
 
In fact, as I’ll explain below, the major lithium producers are likely now in a position where they will have to buy de-risked developers to meet their goals.

This is great news for shareholders of the burgeoning junior lithium space.
 
Example: lithium leader Albemarle (ALB-NYSE) wants to be producing 165,000 tons per year (tpy) of Lithium Carbonate Equivalent (LCE) by 2021, up from 89,000 tpy today. As context, the global LCE market today is estimated at 190,000 tpy.
 
As expansion in Chile continues, operational issues are likely as brine projects are notoriously difficult. Major challenges here could prevent them from reaching their 165,000 tpy goal.

The bigger issue for them is building out both their mine and conversion capacity. This tripped up several companies during the last lithium boom in 2012. Lithium hydroxide is becoming the preferred lithium chemical in the battery business.