Note that lithium (35x) and then flake graphite (17x) have by far the two biggest demand pulls. The chart below shows what happened to iron ore when China accelerated their industrialization and urbanization. But Pilbara Minerals isn’t the best performer in the industry, not by a long shot. A number of other lithium shares have outperformed the lithium giant with significantly stronger gains over the same period. Get updates on the IEA’s latest news, analysis, data and events delivered twice monthly.
Global supplies for the electric vehicle battery metal outpaced demand over 2023, fuelling a glut that has dragged on prices and caused producers such as Albemarle, the world’s largest supplier, to cut jobs and pause expansions. In 2022 we saw most EV metals prices surge higher, mercatox review as EV demand soared (107% in 2021 and 56% in 2022). Then in 2023 we saw prices collapse as demand slowed (EVs grew ~30% YoY in 2023), supply surged, and excess inventory was wound down. Of course the EV metals sector is new and very vulnerable to swings in supply and demand.
Battery costs are the most expensive component in an EV, and lower lithium carbonate prices are likely to ease a major cost pressure on automakers like Tesla. Last year, E Source estimated that battery cell prices will surge 22% from 2023 through 2026, peaking at $138 per kilowatt-hour thus reversing a multi-year trend whereby battery pack and EV costs have fallen consistently each year. Various analysts have estimated that EVs will achieve cost parity with ICE vehicles when battery costs fall to ~$100 per kilowatt-hour, which could happen in just a few years and mark a major win for the global clean energy revolution. Fast forward to today (Feb. 19, 2024) and the China lithium carbonate spot price is at CNY 97,500/t (~US$13,719/t) (red line drawn by the author). This now means that most Chinese non-integrated spodumene and low grade integrated lepidolite production is now very unprofitable.
IEA total oil stocks, end-November 2023
Today, more and more people also know lithium-ion batteries, because of the proliferation of mobile devices such as smartphones and tablets. We see lithium stocks as undervalued as the market expects a supply surplus, but we disagree. Assuming we move to a 100% EV world the demand surge for EV metals will be virtually unprecedented in history.
- If there were little or no supply delays, the market could see a surplus (and falling prices) over the next several years.
- Get updates on the IEA’s latest news, analysis, data and events delivered twice monthly.
- This now means that most Chinese non-integrated spodumene and low grade integrated lepidolite production is now very unprofitable.
- Our commodity team now expect lithium prices through 1H23 to reflect the near-term tightness and lagging spodumene contract price pass-through before declining over 2H23.
The electric car industry is rising like a phoenix, with Apple and Google poised to launch their own versions soon. Even the Chinese, with the billionaire Jia Yueting leading the way, will also enter the scene with a billion-dollar factory set for car production by 2017. It does look like we may have hit the bottom, or at least we are very near. It should also be noted that February 2024 China EV sales YoY growth will potentially be terrible, given Chinese New Year is in February this year compared to January in 2023.
This alone might delay a lithium price bottom for a couple of months which ties in with some analysts’ views that the bottom will occur late Q1, 2024 or in Q2, 2024. We expect orders to start flowing upstream again either towards the end of the first quarter or early in the second quarter. The China lithium carbonate spot price has been stabilizing since December 7, 2023 and this past 2 weeks has bounced higher from CNY 95,500 to CNY 97,500. “The likely supply surge and downstream overcapacity are set to bring lithium prices down subsequently in the medium term,” GS said in a Feb. 23 note.
Why We Continue to See Higher Prices for Lithium
Furthermore Chinese non-integrated lepidolite and spodumene (from Xinjiang) is almost unprofitable, with Chinese brine (from Tibet) also getting close to being unprofitable. By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don’t worry, though – you’re not locked in, and can cancel your auto-renewal at any time before each ‘anniversary’ date without question or penalty. SQM also said it is working with communities in Chile’s Atacama region as it finalizes details of its agreement with state-run miner Codelco, signed in December, as part of a government plan to boost the state’s role in the lithium sector. Revenue for the period fell 58% to $1.31 billion, also lagging LSEG’s $1.35 billion forecast. Based on moat and valuation, our top lithium stock picks are Albemarle, Livent LTHM, and Lithium Argentina LAAC, all of which trade in 5-star territory at less than 50% of our fair value estimates.
What these things all mean is that the demand for lithium-ion batteries will rise even further. The price of lithium carbonate is up by 47% from 2015 and the year 2017 will see increased sales of pure electric cars. Add the fact that Li-ion batteries are also used for mobile devices such as smartphones, tablets, laptops, and other wearable devices, and the demand for the commodity will surely increase as well. The success of your investment will depend on the sustained popularity of mobile devices and the increased popularity of electric cars. All these devices need Li-ion batteries, and as such the demand for the metal will skyrocket.
Total floor area by use in the Net Zero Scenario, 2010-2030
With no changes to our outlook, we maintain our forecast for lithium prices to rise in 2024 and to average a little over $30,000 per metric ton from 2023 through 2030. While we expect prices will remain volatile, we think a market deficit will generally keep them above the marginal cost of production of $20,000 per metric ton on an all-in-sustaining cost basis. With our changes to our forecast, our fair value estimates for the lithium producers under our coverage are also unchanged. We view the U.S.-listed lithium stocks under our coverage as materially undervalued, with the Oct. 18 selloff offering a larger margin of safety for long-term investors. Battery expansion related restocking demand and higher EV sales kept the market tighter in 2H22 than previously expected. Our commodity team now expect lithium prices through 1H23 to reflect the near-term tightness and lagging spodumene contract price pass-through before declining over 2H23.
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Lithium has some substitution risk from sodium-ion batteries (low end EVs & energy stationary storage (~10% of demand could be taken by sodium-ion) and flake graphite from artificial graphite. Substitution may potentially cause the demand numbers below to be a bit lower. Very strong December 2023 global EV sales should mean that the cathode and battery manufacturers will need to do some restocking, particularly if EV sales growth holds up in H1, 2024. Aside from various uncommon usages, lithium is used mainly as a component of rechargeable Li-ion batteries and as a treatment for several types of mental disorders.
While we see earnings support for the Australian stocks over months on price lags, on a 12m view we expect lithium stock prices to fall as lithium prices decline from record peaks. Goldman Sachs has forecast that lithium carbonate supply will grow at a brisk 33% annual clip, outpacing demand which will only grow at 25% p.a. The mismatch between the two market forces will depress lithium carbonate prices coinbase exchange review even further with prices expected to sink to $34,000 a tonne in the next 12 months, from around $53,000 per tonne currently, good for another 36% decline. While we see rising supply, we think enough projects will face delays to maintain a market deficit as demand grows. If there were little or no supply delays, the market could see a surplus (and falling prices) over the next several years.
On Oct. 18, lithium stocks plummeted following a sell-side broker’s downgrade for Albemarle ALB and SQM SQM. This was because of expectations that the lithium market will see a supply surplus in 2024 and 2025, leading to lower prices. We disagree, and continue to forecast a price rebound as strong demand growth outpaces supply, leading to a deficit in 2024. One of the best activ trades performing areas of the Australian share market in 2022 has been the lithium industry. Thanks to sky high lithium prices, a number of lithium shares have recorded exceptionally strong gains for investors. If Goldman Sachs is on the money with its estimates, then it could be bad news for developer/explorers that aren’t expected to be producing lithium for a couple of years.
SQM said it sold record-high volumes of lithium during the quarter, hitting around 51,000 metric tons and up nearly 20% from a year earlier, even as average prices dropped 73%. You can directly buy stocks in companies involved in lithium mining or in Li-ion battery production. Or you can get involved in funds that invest in companies of this type.