...lithium winter hibernation across 2024-2025, the chances of a lithium recovery before then is I reckon slimmer than a market crash or sharp market correction before the end of 2025.
LITHIUM OUTLOOK
Macquarie
Macquarie describes its overall view on lithium as “underweight”.
The broker cut its 2024 lithium carbonate price target by 27%, and its 2024 spodumene price target by 24%. 2025 price targets for each are cut by 35%.
Macquarie blames the cuts on “short-term demand weakness and committed supply unable to react”. The supply overhang would likely linger through 2026 before “a tighter market leads to a modest price recovery”.
Figure 5 - Spodumene Price Update versus. Source: Macquarie Research, Bloomberg, Visible Alpha, June 2024. (From: Commodities update: Hard Knock Li-Fe, Macquarie Research, June 21, 2024)
The broker notes that its spodumene price target in 2024 of US$1,056/t and in 2025 of US$975/t are 29% and 31% below consensus respectively – and that it’s also below spot pricing.
Such a low price could cause a “host of project deferrals”. The market should start to balance by 2026 with the spodumene price recovering to US$1,363/t (15% below consensus). This would “not be enough to sanction new green field developments”.
From 2027, “continued demand growth” would help the spodumene price recover to US$1,750/t (in line with consensus). This would be “enough to drive a supply response, but the lag between signal and response drives a deficit”.
In 2028, Macquarie’s spodumene price target of US$1925/t is 10% above consensus, and their long-term target (i.e., beyond 2028) of US$1,500/t is 15% above consensus.
Morgan Stanley
“We see Li remaining subdued as China's lithium carbonate inventory continues to move higher coupled with potentially weakening ex-China demand for Chinese EVs driven by EU/US tariffs.”
Exhibit 8: China's lithium carbonate inventory (kt/week). Source: SMM, Morgan Stanley Research. (From “Strategy Q3: Bulks over Base”, Morgan Stanley Research, June 21, 2024)
Morgan Stanley’s spodumene price targets are as follows: US$1,003/t in 2024 (-18%), US$1,035/t in 2025 (-23%), US$1,350 in 2026 (unchanged), US$1,350/t in 2027 (unchanged), US$1,260/t in 2028 (unchanged), and US$1,414/t in the long term (-7%) (i.e. 2030 and beyond).
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