I find it interesting that Elementis PLC continues to mine Hectorite in the Mojave Desert with an unusually high concentration of Lithium (reported by at least 1 geological report as well over 2%), but is not mentioned as a Lithium source (see article from FT below on Tesla's new NV factory). As Tesla's factory comes online, it seems inevitable that a new factory which will consume nearly half the current annual global production of Lithium will have an impact on prices...

Eoin Treacy's view

Elementis is a leading producer of surfacants and as you say is a producer of lithium as a by-product of its hectorite mining operation. This does not appear on the company’s balance sheet at all and they do not publish a list of their clients on Bloomberg. I’ve emailed the company’s investor relations department to confirm what exactly the situation is with lithium production and will relay any reply I receive in Comment of the Day. 

Generally speaking renewable energy solutions have not been immune from the sell-off in energy commodities not least because they are less competitive the lower prices fall. However while this is an important consideration, the fallout from the climate agreement concluded last weekend suggests the sector will continue to receive support from regulatory frameworks globally which should act as a cushion for business models even in a low energy price environment. 

Elementis has paid a special dividend in the region of 18% of the share price for the last three consecutive years with the next announcement expected in late February. While surfacants are used in a wide variety of cosmetics, their use in oil well drilling has represented a headwind for Elementis this year. The share found near-term support in the region of 200p from late September and a break in the progression of higher reaction lows would be required to question potential for continued higher to lateral ranging. 

Clicking through the constituents of the lithium miners section of the Chart Library the majority of companies remain in consistent medium-term downtrends. Australian listed Orocobre replied to an ASX query today saying that it did not know of any non-public information that would explain its two-day jump. A break in the progression of lower rally highs would signal a return to medium-term demand dominance. 

FMC Corp is the largest weighting in the Global X Lithium ETF which also includes shares for battery manufacturers. FMC also remains in a medium-term downtrend but potential for a reversionary rally is improving 

For a company like Tesla which has telegraphed surging demand for lithium in the next couple of years, it would probably be better off signing royalty streaming agreements with high potential mine developers rather than going hat in hand to some of the larger, more established companies. This appears to be what they have been doing but they may need to hurry because Tesla is unlikely to be the only company seeking to expand rapidly into the electric car market. This article highlighting Chinese backed attempts to build a competing product is just one example. 

There is little evidence in Tesla’s share price that investors are worried about sourcing raw material for the giga-factory. The share continues to range mostly above $200 and a sustained move below that level would be required to question potential for continued higher to lateral ranging.