Lithium prices rebound as electric vehicle demand surges...

Lithium prices rebound as electric vehicle demand surges Investing.com - 2023-05-16

Investing.com- Lithium prices are on the path to recovery after a massive 70% decline, driven by increasing demand due to the growth in electric vehicle (EV) adoption worldwide and countries' efforts to meet carbon emission targets. The drop in lithium prices was a result of China cutting EV subsidies earlier this year, which led to weaker demand and rising inventories.

However,as these inventories decrease, experts like MorganStanley (NYSE:MS) believe that the lithium market is at a turning point. Lithium-ion batteries play an essential role in renewable energy since they power EVs and store energy generated from solar and wind sources. As more nations transition towards clean energy solutions, lithium demand is expected to continue growing despite increased supply.

ShaneLangham, senior private wealth advisor at Sequoia Wealth, highlights thatbattery-grade lithium or lithium carbonate's rapid increase in demand isprimarily due to EV production rates surging. Furthermore, he points out thatthis doesn't even account for large-scale batteries used for electricity gridsor storing renewable energy from solar or wind sources.

Withhigh global EV battery production based mainly in China where most tradingoccurs, carbonate spot prices have risen 30% from their lows while hydroxidehas recovered by 20%. Batteries made up nearly 80% of all lithium usage lastyear according to Australia’s Office of the Chief Economist (OCE), withexpectations that it will reach 90% by 2028 as more people switch to electricvehicles.

EmanuelDatt from Datt Capital believes that improved investor sentiment around EVadoption along with supportive government policies such as President JoeBiden's Inflation Reduction Act helped drive strong price increases for lithiumlast year.

Globaldemand for lithium will likely surpass production until around 2027 when supplycatches up according to OCE forecasts; meanwhile export earnings from lithiumin Australia are expected to triple by the end of June 30th. S&P Global (NYSE:SPGI) Market Intelligence also predicts a deficit of battery-grade lithium, which will support prices above $40,000 per tonne.

DarkoKuzmanovic from Janus Henderson notes that electric vehicle adoption is projectedto grow significantly over the next decade with EVs making up more than 40% ofall vehicles sold by 2030 according to International Energy Agency (IEA)forecasts. Major automakers such as Ford, GM, Stellantis and Tesla (NASDAQ:TSLA) have been directly supporting lithium projects in order to secure supply for future production plans.

However,some experts like Sam Berridge from Perennial Strategic Natural Resources Fundbelieve that it may take time for lithium prices to fully recover due toincreased supply following high price levels. Despite this outlook, demandgrowth remains robust and could lead to price stabilization after the recentdecline.

Time to cover your shorts and PO!