The steep declines are on the back of valuation concerns, easing lithium prices and mixed operating updates.
Both Vulcan Energy and Lake Resources rely on the development and application of direct lithium extraction (DLE) technologies to meet their ambitious production forecasts.
The value proposition from DLE technologies is large on paper, but the technology has not yet proved it can work at scale, wrote Daniel Jimenez, Morgan Stanley’s lithium consultant, in a research note to clients on Monday.
The same day, Vulcan lifted its total capital expenditure projections for its European lithium project using a DLE to €1.5 billion ($2.3 billion), with Lake Resources boasting it can use DLE technology at its lithium brine projects in Argentina to bring up to 50,000 tonnes per annum of lithium carbonate to the market.
Management at both businesses have clashed with short seller J Capitalin the past over claims the businesses are over egging their chances of securing financing and operational success using DLE.
On January 20, Liontown Resources also lifted its cost estimates for its Kathleen Valley project to $895 million. It is the fourth time that the project’s cost has blown out in three years as the resources industry battles labour shortages, associated wage inflation, and rising costs.
Morgan Stanley’s forecasts
Morgan Stanley said it expects total lithium carbonate supply to increase from 684,000 tonnes in 2022 to 968,000 tonnes in 2023 and 1.24 million tonnes in 2024. Australia already leads the world as a supplier, ahead of China and Chile. Australia is expected to bring the most new supply to market between 2023 and 2025.
Morgan Stanley also expects the US and Canada to ramp up supply, but not until after 2025 as a bevy of Canadian lithium explorer hopefuls hit the ASX boards.
Shares in Patriot Battery Metals have nearly tripled since they listed in December, with others including Battery Age Minerals, Green Technology Metals, and Critical Resources all holding Canadian tenements.
Long development times mean Morgan Stanley expects North America to contribute just 52,000 tonnes of lithium carbonate to global supply in 2025, before that jumps to 208,000 tonnes in 2030 as North American governments help finance the energy transition.
Elsewhere, broker Citi said Brazil is set to ship its first cargo of high-purity battery grade lithium to China in April.
“The ship will set sail from the port of Ilhéus (Bahia) with 15,000 tonnes of product bound for China. This volume and much more in the future, will supply Chinese refineries that are suppliers to electric car battery makers,” Citi said.
Brazil will contribute about 51,000 tonnes per year of lithium carbonate to the market by 2025, which would equal 8.8 per cent of the total production out of Australia on Morgan Stanley’s numbers.
Four of the five most shorted lithium businesses are yet to reach production, as hedge funds bet the lithium boom will pass them by as more supply comes to market by 2030.
