While it is true that #lithium prices are under pressure and market supply is likely to remain sufficient in the mid-term, lithium equities have corrected sharply to reflect oversupply.
Are there investment opportunities? IMO, yes, in companies with sufficient cash, strategic partners or prepayment alternatives to build their projects during the downturn. Alternatively, companies that are already in production that can survive until 2026/2027. When the market turns (which it always does), they will be well poised to generate significant free cash flows.
....how lithium stocks perform going forwards does not necessarily have to correlate with lithium demand [because a) higher lithium demand would be offset by higher lithium supply, resulting in no imbalance, and price stability b) lithium stock valuation premium can erode as market comes to grips with a no or modest growth for an extended period of time (Nike stock fell big time not because it did not generate significant FCFs but because it wasn't good enough to justify its valuation and just like RHC (Ramsay Health) stagnated years after it struggled to generate the exceptional growth that inspired its earlier meteoric run) ]
just like
....how continued EV growth did not result in higher lithium price materialising [which I had been telling you months ago]
....Rodney's narrative is the narrative of stale lithium bulls who must impress on all that 'lithium is not dead, and the major producers can continue to thrive with reasonable FCFs (free cashflows) and EV is here to stay and will become the norm vehicle of choice in the years ahead'. And all of that is not wrong, and correct, BUT
...if you understand markets, especially in relation to growth stocks that typically command higher PE multiples and valuation premiums, it is all about EXPECTATIONS. Lithium stocks have corrected materially since the hopes of price recovery 2 months ago because funds are flowing out of stocks that do not have growth prospects into other sectors that can continue to deliver growth- and it is simple as that. Will fund flows return to lithium stocks? Yes sure as it does for any sector when its valuation starts to look attractive relative to growth prospects ahead.
BUT in the interim, two things will happen first:
1) lithium stock valuation premium will have to adjust lower to reflect an expected extended period of underperformance going forwards
2) lithium stocks will have to focus on survival and cash preservation during winter hibernation - which IMO is not the place one would want to park as a 1-2 year investment timeframe, invariably also exposing oneself to the prospect of a major US market correction (which will hit all stocks especially poor performing stocks). And you should expect fund flows to return after the lithium market has been able to demonstrate a sustainable return to a higher lithium price ranges that would afford the recovery of lithium margins to the major producers.
