ASX Today, page-20502

Bank of America (BoA) said lithium demand expanded twice as fast as supply in 2021.

Global lithium carbonate equivalent production rose 20.7% to 536,978 tonnes last year. While global consumption jumped 64.8% to 556,992 tonnes, resulting in a -20,013 tonnes deficit.

The gap between demand and supply growth is forecast to close in 2022, with both expanding by around 27%. Though, the market is expected to remain in a deficit of -27,627 tonnes, up 37% compared to last year.

Lithium demand and supply outlook (Source: Bank of America Global Research)

Interestingly, the lithium market is forecast to make a sudden U-turn into surplus from 2023 to 2026 as supply growth begins to outpace demand.

By 2027, BoA expects the market to re-enter a massive supply deficit of -91,876 tonnes, more than triple the supply deficit expected in 2022.

The deficit is projected to expand to -538,068 tonne by 2030 as supply growth plateaus.

Why oversupply is not likely

Lithium reporting agency, Benchmark Mineral Intelligence was quick to kick back at a previous Goldman Sachs research note titled "Battery Metals Watch: The End of the beginning".

They outlined 5 fundamental reasons as to why the oversupply call is wrong.

1. Industry cannot reply on Chinese supply

   • Goldman sees the most "significant" supply coming from China, which has traditionally produced low quality lithium

2. Capacity does not equal supply

3. New lithium supply comes at a higher cost base

4. Contract pricing is important

5. Lithium chemical capacity may not meet downstream specifications

Taking a look at the timeline

Surplus or not, several ASX-listed lithium players are expected to come online in the next couple of years (and ramp up in subsequent years), notably:

• 2022: Core Lithium (ASX: CXO)

  • Mineral Resources' (ASX: MIN) Mt Marion ramp up

• 2023: Sayona Mining (ASX: SYA)

• 2024: Lake Resources (ASX: LKE), Liontown Resources (ASX: LTR)

  • Allkem's (ASX: AKE) James Bay and Sal de Vida projects

• 2025: Leo Lithium (ASX: LLL)

By tonnage, the most significant projects/companies are:

• Mineral Resources' Mt Marion stage two upgrade to 900,000tpa

• Liontown's Kathleen Valley project producing 511,000tpa (increasing to 658,000tpa)

  • Liontown expects to supply around 5% of global spodumene in 2024

The last line is encouraging.