Material Matters: Lithium, Coal & Alumina
https://www.*********.com.au/2019/04/05/material-matters-lithium-coal-alumina/
LithiumThe performance of lithium in 2018 was less than ideal, amid meaningful falls in Chinese pricing and expectations of oversupply. Canaccord Genuity suspects the outlook is not as poor as these two details suggest. Demand growth is ongoing and new supply is yet to materialise. Average prices ex-China are up year-on-year.
Most producers missed their targets in 2018 and the broker has less confidence in forward supply forecasts. The main response is likely to come from the higher-cost hard rock lithium this year and brine should follow early in the 2020’s. The market share of hard rock lithium is expected to increase to 68% by 2025, from 48% currently.
Meanwhile, demand is likely to reach an inflection point in the mid 2020s and the broker forecasts demand of 2.2mt of lithium carbonate by 2030. This would be up 700% on 2018 estimates.
Still, supply growth is likely to outpace demand from 2020-24 before a deficit emerges by 2025. In the longer term, supply is expected to struggle to keep pace. In the here and now, stronger pricing is required to turn sentiment and lift equities, Canaccord Genuity believes, and this may not happen.
The broker prefers lower-cost projects over pure-play concentrate producers, because of pricing pressure. Top picks in Australian lithium equities include Orocobre ((ORE)), Kidman Resources ((KDR)).
