General PSC Chat/Discussion, page-226

Even the "liars factory" are getting on the lithium story

https://www.livewiremarkets.com/wires/talk-of-perpetual-lithium-deficit-sends-new-energy-bulls-into-a-buckin-frenzy

It’s a question that Macquarie’s equity desk addressed this week. It came up with a stunning answer – the lithium market is in perpetual deficit. When was the last time a commodity was described to be facing a "perpetual deficit"? Has it ever been the case?

Naturally enough, a view on a perpetual deficit scenario affects price expectations. So, there is no surprise Macquarie has upgraded its lithium price outlook.
It has upgraded its price deck for lithium carbonate and hydroxide 6-13% for CY21-CY25, while its pricing estimate for the preferred hydroxide precursor, spodumene, has been increased by 7-30% over the same period.“We have materially upgraded our demand outlook for energy storage system demand and marginally increased EV demand,” Macquarie said.“This has translated to a material upgrade in forecast demand for lithium over the short and medium-term.“In the longer term, we believe the lithium market is likely to be in perpetual deficit. As a result, lithium prices are expected to continue to rise, moving to an incentive price by CY24. Some new supply additions temporarily tighten the market in CY26, but beyond CY27 the supply deficit widens significantly.”As it is, Macquarie has lithium hydroxide (Asia) rising from $US11,495t in CY21 to $US16,200 in CY25, and carbonate rising from $US10,399t to $US14,250/t in the same period.Importantly for the WA spodumene producers, Macquarie reckons that the lack of independent suppliers should see spodumene remain tighter than other lithium markets.

That comes through in Macquarie’s forecast that spodumene will outperform by rising from $US652/t in CY21 to $US820/t in CY25, and $US840/t in CY26.Now, it has to be said that the lithium true believers were awake to the potential for the emergence of a perpetual supply shortage as far back as September last year. It’s why the share prices of the lithium stocks have recovered in spectacular fashion since.Still, Macquarie sees upside in the share prices for the lithium producers from here and already had share price targets on them that were well ahead of ruling market prices. With its upgrade of the lithium price outlook, it has taken its share price targets up another notch.Its price target on Minerals Resources (ASX: MIN) is now 4% higher at $76, IGO is 9% higher at $9.50, Pilbara (ASX: PLS) is 13% higher at $1.80, Orocobre (ASX: ORE) is 10% higher at $7.80, and its merger partner Galaxy is 4% higher at $4.70.