Lithium to rise as EVs accelerate
May 17, 2023Lithium prices are primed for a dramatic upswing after an influx of projects chasing the allure of all-time highs have not been able to feed the insatiable and accelerating raw supply demands of battery-driven industries.
Prices have been torn down by 70 per cent over the past five months after China cut down on electric vehicle subsidies, but with the EV superpower firmly back in a growth swing, Morgan Stanley is one of the commodity analysts who see the market at an inflection point.
“Sentiment is clearly improving, and their lithium inventories appear to have eroded,” Morgan Stanley commodities strategist Mr van Straaten said.
“The turning point in lithium markets? Yes, it looks like that for now at least.”
Shane Langham, a senior private wealth adviser with Sequioa Wealth, said growth in the sector was far from over.
“I don’t see lithium as a one-off flash in the pan. The demand for lithium carbonate, or battery-grade lithium, is increasing at a rapid rate because of the rate of EV production increases,” Mr Langham said.
Senior portfolio manager at Janus Henderson, Darko Kuzmanovic, agreed that a lithium story of immense growth was one still being told, with EV penetration expected to become more than 40 per cent of the market by the end of this decade.
“This is a structural and long-dated, decades long theme, that has just begun. Over the last five to six years, lithium demand has fluctuated at a compound annual growth rate of 25 per cent per annum. This is expected to continue until EVs become the dominant type of vehicle,” Mr Kuzmanovic said.
Chinese EV sales have recovered by over half to mark 1.05 million units in March from January, and international demand is rising in tune, with Chinese exports of lithium batteries surging by 94.2 per cent year-on-year.
And the majors have already sprung into action, Albermarle’s $5.5 billion takeover bid was swiftly rebuked by Liontown, who saw the offer as an opportunistic grab in a time of purported market softness, and the US lithium titan has continued to keep its eye on undervalued lithium assets.
A merger between Livent and Allkem to become the world’s third largest lithium miner could just be the beginning, Benchmark Mineral Intelligence see the scene being set for a sweeping period of mergers and acquisitions in the industry, a boom similar to the global wave in the 2000’s that saw several Australian mining companies become absorbed into multinational organisations.
Lithium prices in Yuan per tonne – Source: Trading Economics
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