Saw this on another thread. Food for thought about Lithium...

Saw this on another thread. Food for thought about Lithium generally...

AS PREDICTED WRONG AGAIN MAC BANK Plans by lithium developers to more than double the capacity of the US$3 billion industry over the next decade have got off to a slow start, according to Citi Research, prompting the global investment bank to dramatically upgrade its near-term price estimates. In a fresh research note released this week, Citi analysts say lithium volumes have been “disappointing” – with just 10,000 tonnes of new LCE capacity (lithium carbonate equivalent) coming on stream in 2016 compared with projections of 35,000 tonnes. The revised price forecast is a sensational Christmas present for the likes of Pilbara Minerals (ASX: PLS) and Kidman Resources (ASX: KDR) as they start development of their respective world-class lithium deposits in WA. “We believe actual delivery of announced projects is likely to be significantly weaker than nameplate capacity announced, driven by the challenges of financing, executing, ramping up and then operating at capacity,” Citi said. “Citi’s base case assumes 50% of the announced under-construction capacity materialising over 2020, which still means that ~130kt LCE is added to the market,” it says. The limp supply response is coming up against red hot demand, emanating mainly from the electric vehicle (EV) market in the US, Europe and China, Citi says, noting that the lithium market was “caught off-guard” by a sudden increase in demand (primarily from the Chinese EV sector) with supply struggling to match demand. Citi’s views run counter to those held by some other analysts, notably Macquarie, who have predicted that the market would literally be swamped by a tsunami of supply coming on stream significantly faster than expected. In the longer term, Citi sees “significant capacity coming on stream” that would gradually bring the price down, but in the short term the investment bank is predicting a price surge in 2017 of a kind rarely seen in commodity markets. Citi has upgraded its LCE price estimate for 2017 to a staggering US$13,250 a tonne, up a whopping 80 per cent from its previous estimate of US$7375 a tonne. For those investors in emerging hard rock spodumene producers such as Pilbara Minerals (ASX: PLS) and Galaxy Resources (ASX: GXY), that sort of pricing translates into a price for 6% spodumene concentrate well north of US$900 a tonne. The estimate is well supported by recent market evidence, including the recently announced off-take agreement by Galaxy Resources for its Mt Cattlin operation, which was price at US$830 a tonne for 5.5% specification going up to US$905 a tonne for 6% spec. Industrial Minerals recently reported that annual contract agreements for the upcoming calendar year in the lithium industry have now largely been settled, “with prices up sharply from what was paid on material delivered during the current year.” According to IM, “annual lithium contracts for 2017 deliver in Europe and the US have been agreed at levels roughly double those seen in 2016.” The news, while largely ignored by investors in the lead-up to Christmas, appears to bode very well for investors in the lithium space in 2017.