comScore

This Specialty Chemical Company is Taking a Leap in Lithium Stocks Gold Rush

Lithium batteries are used largely in consumer electronics during the 1990s and 2000s. Photo: Bloomberg
Lithium batteries are used largely in consumer electronics during the 1990s and 2000s. Photo: Bloomberg

Summary

This smallcap specialty chemical firm recently acquired 100% stake in a lithium-technology startup. More details inside…

Are you familiar with the proverb ‘All that glitters is not gold’?

Well, I believe the proverb should soon change. I guess it should be - ‘All that glitters is not white gold’. Allow us to explain… 

By white gold, we’re talking about Lithium. Lithium is a soft silvery-white alkali metal that has made its place formidable in recent times and has turned out to be a money maker. 

Lithium is one of the most sought-after minerals in the world. It is called white gold because of its increasing demand and wide use. 

But what makes Lithium so special? Let’s take a deep dive into lithium and its uses.

Lithium: the white gold

Lithium is a special lightweight metal that can be used to manufacture lithium-ion batteries or Li–ion batteries. Li-ion batteries use lithium as a compound as the material at the positive electrode, and graphite at the negative electrode.

The best thing about Li-ion batteries is that they are lightweight rechargeable batteries. Li-ion batteries are designed to last for a long time. A lithium ion battery can perform between 500 to 10,000 recharge functions. 

Li-ion batteries can safely store large amounts of energy, ensuring stable and predictable flows of electricity even in decentralized immobile (i.e., stationary) or mobile modes in remote areas.

Lithium batteries are used largely in consumer electronics during the 1990s and 2000s. Since then, because of their lightweight and high energy density, lithium batteries are used in many commercial and industrial goods beginning from smartphones to electric vehicles (EVs).

During the last decade, demand for these batteries went up exponentially because of the need for an alternative to conventional vehicles. The increasing popularity of passenger EVs is largely a result of the capacity improvement of Li-ion batteries and significant price declines due to investment in productive capacity.

Global Demand of Li-ion batteries

 

Data source: UN Report

Lithium-ion batteries have been a promising clean technology because the battery stores energy in its cells, as opposed to generating energy by combusting fossil fuels in a gasoline and diesel engine, to power a vehicle or provide electricity to a building.

However, Lithium is not just used for batteries. It is also used as a mood stabilizer in the treatment of a bipolar disorder, depression, and other mental health conditions.

It is also used in the production of special glass and ceramics, as it helps to reduce the melting temperature of these materials. It can also be used in the aerospace and military industries for its high heat transfer and thermal conductivity properties. 

Hence, lithium is the need of the hour, which makes it white gold. 

But who is cashing in on this opportunity? 

Who’s winning the lithium race?

China. 

According to official data, the biggest producers of Lithium are Chile, Australia, Bolivia, and Argentina. China is also a Lithium producer however it owns only minor portion of Lithium mines. 

However, it has roughly 60% of the world’s lithium chemical supply. China also produces three-quarters of all lithium-ion batteries.

Today, China controls the global processing industry and it has achieved this feat by buying mines all around the world.

This has put all other countries under duress. The scenario has changed especially after the Covid-19 pandemic because countries over the world are looking to reduce their dependence on China. This is good for India which can make the most of China plus one megatrend but until now, India did not have any Lithium deposits.

The biggest news last month was the discovery of Lithium in India. The discovery was made by the Geological Survey of India in the Salal-Haimana area, of the Reasi district, in Jammu & Kashmir. 

The discovery has put India on the map of Lithium supply. India's mining secretary confirmed that the quality of the metal is high, around 500 parts per million (ppm). This compared to 200 ppm in normal grades of Lithium found in other countries.

However, it remains to be seen whether the opportunity is realistic. The official figures announced by India is the resource amount. The final reserve, that can be mined, will be lower. However, this will still be more than enough to make India one of the world's largest producers of Lithium, once the mining starts.

This could be a big opportunity for India. Companies involved in the Lithium ecosystem will lap up the opportunity, and in fact, a smallcap specialty chemical company has already taken a step forward with this regard.

Neogen Chemicals and Livent Corporation

On Monday this week, Neogen Chemicals entered into a definitive agreement with Livent Corporation to acquire 100% stake in BuLi Chem for cash consideration of 250 million (m).

BuLi Chem is a subsidiary of a foreign company owned by Livent USA Corporation. It owns the technology to manufacture N Butyl Lithium and other organolithium products using lithium metal, which are key reagents for lithiation reactions used in the manufacturing of several complex pharmaceutical and agrochemical intermediates.

BuLi Chem manufactures and supplies N Butyl Lithium to several leading pharma and agrochemical companies in India and across the world, and is built one of the very few commercial facilities outside of China for this chemistry.

According to the exchange filing, the company’s management is of the view that the technology to use highly reactive Lithium metal and to manufacture N Butyl Lithium along with Neogen's ability to recycle Lithium will give a significant competitive advantage to Neogen’s existing as well as under-development pharma advanced intermediates and CSM projects.

Neogen Chemicals has also planned to develop cells for EV batteries. Recently, the company started manufacturing electrolytes for lithium-ion batteries.

This move by Neogen Chemicals is a definite step towards cashing in on the opportunity of Lithium mines found in India. 

Shares of the company surged over 6% on Monday on the back of these developments.

The challenges…

One of the major uses of Li-ion batteries is in electric vehicles. EVs are in limelight because they do not burn fossil fuels. However, a lot of fossil fuels are combusted to make Li-ion batteries. 

The whole point of using EVs is to minimise greenhouse gas emission. However, electricity and heat emit more greenhouse gases than the transportation sector.

Data source: UN Report

This questions the whole use of EVs, which ultimately casts a shadow on the use of lithium-ion batteries.

But we all know that EVs are the next big thing. The Indian auto industry stands under the roof of the EV revolution with Lithium at its epicenter. The discovery of Lithium deposits could benefit multiple industries at the same time.

We are in for exciting times ahead. Watch this space for more.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. 

 

This article is syndicated from Equitymaster.com

 

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
more

MINT SPECIALS

Switch to the Mint app for fast and personalized news - Get App