First, a rare slowdown in EV demand in the pivotal Chinese market has taken the markets by surprise. According to the China Passenger Car Association (CPCA), sales of new energy vehicles, including pure battery EVs and plug-in hybrids, fell 6.3% in January, a sharp contrast to a blistering 90% growth in 2022. Ultimately, Goldman is forecasting global lithium demand to grow to ~1,300kt LCE by 2025, but expects lithium production to hit ~1,700kt LCE. “Demand is still healthy, but battery and EV makers are currently destocking instead of placing new orders. The subdued spot demand therefore is weighing on sentiment and pressing down prices,” Susan Zou, Shanghai-based vice president at Rystad Energy. SQM said it expected to produce 210,000 tons of lithium carbonate in the first quarter this year as it ramps up its Chile operations, adding that 2024 capital expenditure would come to about $1.3 billion.
- On Oct. 18, lithium stocks plummeted following a sell-side broker’s downgrade for Albemarle ALB and SQM SQM.
- At current lithium prices there is minimal incentive for many new projects.
- 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.
- The Trend Investing forecast below shows peak EV sales acceleration (in terms of number of units sold) should occur from about now to 2035.
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, coinspot reviews 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.
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The irony is that we are near the beginning of an EV metals supercycle where demand for EV metals will potentially skyrocket over the next decade, assuming we continue to move towards electrification of global vehicles. For most people in previews decades, lithium was either a controversial treatment for brain disorders or a song by Nirvana. In the 1790s, a Brazilian naturalist discovered the mineral called petalite on an island in Sweden. This mineral us usually white to grayish in color, but when it’s thrown into a fire it flares into bright red. As the chart shows, CAM manufacturers have been destocking at a fast pace, once battery inventories return to normal level then orders should start to flow upstream again…
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has questrade forex no position in any of the stocks mentioned. “The excess in lithium and battery materials … is expected to continue during this year, keeping pressure on lithium market prices,” SQM chief executive Ricardo Ramos said in a statement.
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.
By the end of 2016, this will grow to as much as 25% by the end of 2016. Investors can draw their own conclusions on what scenario (base case or high case demand) will likely play out. In 2022 we saw what happens when EV demand surges and in 2023 we saw what happens when supply surges.
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This is also dependent upon lithium prices being high enough to incentivize (and hence finance) expansion and new production. At current lithium prices there is minimal incentive for many new projects. “New energy car sales in January didn’t meet our expectation, with a rare year-on-year decline in a single month’s sales,” Cui Dongshu, secretary general of CPCA, has revealed in an online briefing on Wednesday.
This is resulting in severe cost cutting and several mines going into care and maintenance, which over time reduces supply. Lithium is mainly used for energy storage such as batteries for electric vehicles and sustainable energy generation. The price of Lithium is expected to rise substantially in coming years as the world moves further towards using green energy and lower carbon industry. Even better for EV enthusiasts, falling lithium carbonate prices is great news for the EV revolution.
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However, given that much of the new supply will come from greenfield projects, which have historically faced delays in nearly all resource extraction industries, we think a scenario in which all new supply enters the market on time is unlikely. The September 2023 chart below from Macquarie shows the various Chinese lithium producers cost of production. Back in September 2023 the lithium carbonate spot price was at ~US$21,000/t (blue-dotted line), a price where the Chinese non-integrated spodumene producers were starting to become unprofitable. China lithium carbonate spot prices have fallen ~82% from their 2022 high and are now well below the marginal cost of production.
Lithium Price Chart
Thankfully, many analysts expect the slowdown in the lithium and EV markets to be a temporary blip. The miner, which also produces fertilizers and industrial chemicals, reported a quarterly net profit of $205.9 vantage fx broker million, below the $317 million expected by analysts polled by LSEG, after a gradual slide in earnings over 2023. Also in 2012, the automotive sector accounted for 14% of the Li-ion battery market.
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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By the time their operations come on line, they could be dealing with wildly different lithium prices. The Trend Investing group includes qualified financial personnel with a Graduate Diploma in Applied Finance and Investment and well over 20 years of professional experience in financial markets. They search the globe for great investments with a focus on trending and emerging themes. The current focus is on electric vehicles, the EV metals supply chain, stationary energy storage and AI. Lithium supply is driven by current producers expanding and new projects coming online.
Dongshu has blamed the Lunar New Year and the end of EV subsidies for the decline. Starting Jan. 1, 2023, Beijing no longer offers subsidies to buyers of electric vehicles, ending 13 years of the government offering subsidies to EV buyers to achieve price parity with internal combustion vehicles. The company said it expected lithium sales volumes to increase 5%-10% this year, with global demand forecast to rise 20%, although warned that oversupply would hold prices steady. With such a limited supply, any increase in demand can truly boost the price of the metal in the world market. And that’s happening right now because of the current success of the Tesla car company.
H2, 2025 may see the next surge in EV sales as cheaper EVs become available in the West from BYD, Tesla and others which may lead to the next lithium price surge. Just last week BYD launched the Dolphin Mini (Seagul) in South America starting from US$20,100. Lithium demand is mostly driven by EV adoption and to a lesser degree energy stationary storage (“ESS”) adoption. The chart below forecasts that if EV adoption and ESS surges (top line) we will get large lithium deficits again this next decade. Chile’s SQM, the world’s second-largest lithium producer, on Wednesday posted an 82% fall in its fourth-quarter net profit from a year earlier, below forecasts as prices for the key battery metal continued to slide from earlier peaks.
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