Patricia Mohr names lithium as one of top picks for 2016

Tesla Motors   has signed a conditional agreement with joint-venture partners Bacanora Minerals   and Rare Earth Minerals    to secure long-term resources from the juniors' Sonora Lithium project, 180 km northeast of Hermosillo in northern Mexico's Sonora state. Credit: Bacanora MineralsTesla Motors has signed a conditional agreement with joint-venture partners Bacanora Minerals and Rare Earth Minerals to secure long-term resources from the juniors' Sonora Lithium project, 180 km northeast of Hermosillo in northern Mexico's Sonora state. Credit: Bacanora Minerals.

Most mined commodities declined in price this year, but spot prices in China for lithium carbonate actually increased, rising 15% year-on-year to as high as US$7,500 per tonne, making it one of Patricia Mohr’s top picks for 2016.

“It’s a new age metal,” Mohr, vice president of economics and commodity market specialist at Scotiabank says, noting that lithium is used in lithium-ion batteries to power electric cars, a sector that is bound to expand in the years ahead.

According to Roskill in London, contract prices for lithium carbonate in 2015 were US$5,575-US$5,965 per tonne, CIF China, and are expected to increase by about 5-6% in 2016, but Mohr believes the price increase next year will be greater. 

“There seems to be a growing interest around the world in electric vehicles and even in China there is interest,” she says.

While electric vehicles in China are still just a “tiny part of the market” —  specifically about 1% of all car sales in the country — they are gaining in popularity. Sales of electric vehicles in China so far this year have reached 171,145, a 290% year-on-year increase.  

Mohr concedes that like other countries, China still lacks much of the infrastructure needed for the electric car market to really takeoff, but says mega-cities like Beijing and Shanghai are offering major subsidies and license plate incentives to develop the sector.

While electric vehicles are expensive, with the lower priced models costing about 200,000 renminbi (US$30,847), government subsidies often cover nearly 50% of the purchase price, she says, and electric vehicles are exempt from sales tax.

In addition, licence plates for electric cars are easier to obtain than plates for regular gasoline-driven vehicles.

“When you want to buy a vehicle in a place like Beijing, you just can’t go and buy a vehicle, you have to get a licence plate and it’s restricted in terms of how many they give out a year and they are allocated by lottery,” she explains. “In the case of electric vehicles, it’s unrestricted, so you can get a licence plate for it.”

Electric vehicles in cities like Beijing are also subject to fewer driving restrictions. Gasoline-driven cars are only permitted to be driven on certain days of the week, she notes, while electric vehicles can be driven seven days of week.

“There are some real incentives to buy an electric vehicle in China, but the inhibiting factor is the price and the charging infrastructure is not very ample,” she says. “It’s limited and it’s limited probably mostly to the downtown areas.”

As for the impact that electric vehicles might have on greenhouse gas emissions, Mohr says it depends upon the source of electricity, and argues that in China, much will come from coal, and increasingly from coal fields in Xinjiang and Inner Mongolia, in China’s northwest. 

“China will likely curb the growth of coal-fired power and require clean coal technologies in the Thirteenth Five Year Plan for 2016-2020,” she says, “but coal consumption will not actually decline. The shift to renewable power, natural gas and nuclear, will be gradual.”

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