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Boron The Next Lithium?

PREPARED BY: Chris Stanford 

DATE:2/18/24

Boron presents a remarkable multi-year commodity trade opportunity. While demand analysis is crucial in commodity trading, supply dynamics often wield a greater influence on spot prices. Unlike many commodities with ample supply capacity, Boron production is gradually declining as existing deposits deplete, leading to a significant disparity between demand and supply and subsequently driving prices higher. McKinsey & Company forecasts looming supply gaps for Boron, which could result in heightened prices and market volatility, potentially impeding emissions reduction goals.

Demand Summary

The global Boron market demonstrated robust growth in recent years, with a value of USD 1.98 billion in 2021, projected to escalate to USD 2.78 billion by 2029, reflecting a Compound Annual Growth Rate (CAGR) of 4.3% during the forecast period. Credit Suisse projects a staggering tenfold increase in Boron demand by 2050 under a high-growth scenario, driven primarily by decarbonization technologies, which are poised to account for over 90% of Boron demand. This transformation will elevate sectors currently making up a small portion of Boron’s demand into key players. The push towards decarbonization, fueled by applications such as e-mobility, wind energy, and solar energy, is expected to substantially increase Boron demand. Industries reliant on Boron, such as industrial manufacturing, automotive components, ceramics, and chemicals, are advised to reassess their supply chains and enhance resilience to maintain competitiveness.

Supply Summary 

The Boron supply chain faces challenges due to the anticipated surge in demand and limited supply expansions.  The lack of major supply expansions in the near term is likely to exacerbate the supply-demand gap, potentially triggering a 25–40% price upsurge over the next 4–5 years. Various factors contribute to this disparity, including the absence of proportional supply increases, tightly controlled supply, regulatory hurdles, and operational complexities. The widening supply-demand gap and projected price surge underscore the urgency for sourcing heads across key organizations to secure future supplies and mitigate supply risks. 

Boron and Borophene Tech 

Battery technology is evolving beyond the limitations of Lithium-ion batteries. While Lithium batteries offer significant advantages, such as high energy density, they also have notable drawbacks. These include extended charge times and a decrease in capacity over multiple charge-discharge cycles, necessitating replacement.

In the realm of future battery innovations, there’s exciting potential for flexible and bendable batteries. Emerging materials like borophene hold promise in this regard. Borophene, with its low atomic mass and thin structure, could revolutionize battery design by providing lighter components, thereby improving the energy-to-weight ratio of batteries.

Moreover, both borophene and graphene offer sustainability advantages over current lithium-ion batteries. Unlike lithium batteries, which rely on metals with environmental and supply chain concerns, borophene and graphene are more environmentally friendly alternatives. One of the remarkable properties of borophene is its exceptionally high electrical conductivity. This characteristic can substantially enhance the charge and discharge rates of batteries, leading to faster charging times and improved performance.

How we are playing it: 

We have detailed our specific investment plays in a comprehensive report [linked here]. 

Not all boron mining companies are equal. Many of the largest boron miners operate as part of diversified conglomerates, where the exposure to boron specifically is relatively minor compared to their overall operations. While Rio Tinto holds a prominent position as one of the largest miners in the industry, its boron segment contributes less than 5% to its overall revenue. Consequently, fluctuations in market fundamentals within this segment have minimal impact on the company’s actual revenue.

Additionally, a significant number of boron miners are also involved in lithium mining, as both minerals often coexist in certain geological formations. Recent discoveries of lithium deposits in Nevada have shifted the dynamics of the lithium market significantly. To mitigate risks associated with fluctuations in lithium prices, market dynamics, and regulatory changes, boron miners may diversify into lithium. Yet, considering the changing landscape of the lithium market, we have deliberately chosen boron miners with minimal exposure to lithium. The emergence of new lithium supplies suggests that lithium prices may remain low for an extended period, underscoring the importance of finding companies with specific boron exposure.

Position Sizing:

Given the inherent risks in the commodity mining sector, mining companies typically represent no more than 3% of total portfolio exposure. To manage risk effectively, we diversify our investments across several mining companies. However, it’s essential to note that our approach involves targeting companies with a higher proportion of revenue derived from boron mining. Many of these companies are junior miners or are in the early stages of development, adding an additional layer of risk to our investment. By maintaining low single-digit exposure, we can afford to be patient throughout the multi-year cycle.

Timing the Investment:

Investing in commodities requires a patient approach, as their prices can fluctuate over long cyclical periods, sometimes lasting years or even decades. Successfully timing these cycles demands a blend of both luck and patience. We anticipate that this investment will yield results within a 12-24 month time frame. Given the cyclical nature of commodity prices, pinpointing the exact catalyst that will influence boron pricing in the short term is challenging. However, we believe that our strategic approach and careful selection of companies position us well to capitalize on potential opportunities in the boron market.

We have detailed our specific investment plays in a comprehensive report [linked here].

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