ExxonMobil Enters Lithium Production to Capitalize on EV Demand
Exxon's Entry into Lithium Production
Exxon Mobil announced on Monday its plans to produce lithium, in Arkansas US, starting in 2027 [1]. This is a key component in the manufacturing of batteries for electric vehicles (EVs). The International Energy Agency (IEA) expects demand for critical minerals, such as lithium, to grow three-and-a-half times to 2030 and reach over 30 million tonnes, with EVs and battery storage being the main drivers. [2]
Despite recent dent in demand due elevated inflation, high interest rates and other factors, the EV revolution seems unstoppable. Ten million electric cars were sold globally in 2022 according to IEA, which projects an increase to 14 million EVs this year and to 70 million in 2030 [3]. The US energy giant looks to become a leading player and evaluate opportunities globally, aiming to supply enough lithium for the manufacturing of over a million EV's year by 2030.
US energy companies appear to be more committed to fossil fuels than their European competitors, with Exxon Mobil announcing last month the proposed $59.5 billion acquisition of Pioneer Natural Resources, which will expand its foothold in the key Permian Basin oil fields. Not too long after that, domestic rival Chevron stated its intention to buy the Hess Corporation, gaining access to the oil-rich Guyana and the Stabroek block. With Monday's news though, Exxon Mobil is advancing its non-fossil aspirations and facilitates the clean energy transition.
Furthermore, the entry into lithium production enhances the energy security and independence of the United States, at period of fraught Sino-US relations and trade curbs. China was the top processor of lithium in 2022 and third largest producer, behind Australia and Chile [2].
A few weeks earlier, Exxon Mobil had announced Q3 Earnings in excess of $9 billion, up 15% q/q, but the figure marked an nearly 55% decline from the record highs of the same period a year ago [4]. It also increased the dividend payout to $0.95/share, bringing the 2023 total to $3.68/share, an almost 4% y/y increase.
The stock of Exxon Mobil is having a poor fourth quarter, as oil prices recede despite the war in the Middle East and had also dropped right after the mixed Q3 results. Markets however reacted positively to the lithium announcement, sending XOM.us 1% higher on Monday. They also lifted the broader sector, as the firm is the biggest component of the SPDR Energy Select Sector ETF (XLE.us).
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
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