Why is it surprising to quote from Morgan Stanley? Is there a list of companies that can be quoted. Is Macquarie OK, UBS not OK etc ?
Just ask yourself one thing. When Goldman Sachs released a report back in May 2022 predicting what would happen to the lithium market there were plenty of people that didn't believe them, were you one of them. As it turns out they did a good job with this. Their report also predicted a recovery in the longer term. Below is an extract and a link.
https://www.goldmansachs.com/intelligence/pages/gs-research/battery-metals-watch-the-end-of-the-beginning/report.pdf6. Lithium: Where strong demand and an even stronger supply collide. After a
significant tightening trend last year which generated a 51kt-LCE deficit (11% of global
supply) resulting in a 200% rise in prices, we expect the lithium market to pivot towards
a prolonged phase of surplus starting this year (see Exhibit 22). This softening trend is a
result of a strong supply response even as demand continues to surge.
Indeed weexpect the lithium demand from batteries to rise five-fold to 562kt-LCE this year from
just 105kt-LCE in 2016. As a result, we forecast global lithium consumption to grow
nearly 50% y/y in 2022 and nearly triple by 2025E from 2021 levels. This increase in
demand is a result of the resurgence of lithium based LFP battery chemistry in China
from the beginning of the current decade, which matters given its share of market size
(56% of 2022E global battery sales). This adoption trend has reflected LFP’s relative
lower cost and the region’s strong preference for small-size EVs. Despite this strong
demand profile, we see it outpaced by strong supply trends, most notably from ex-China
spodumene and China lepidolite production growth (see Exhibit 23).
The most significant supply additions are from China, specifically from lepidolite (mica), a hardrock lithium
resource different to traditional spodumene. We now expect nearly 350kt-LCE of supply
additions from China to start producing by 2025E, contributing to nearly one-third of
global increments over the period. As per the table (see Exhibit 27), we expect lithium
prices to continue to correct for the rest of the year and remain under pressure from
increasing supply over the next few years. We forecast lithium carbonate and hydroxide
price to fall 70% y/y and 67% y/y respectively in 2023. It is important to note that the
oversupply and price pressure forecast will ultimately sow the seeds of the next bull
market, in our view, as it will reinforce lithium’s position as the preferred raw material by
battery makers.
(20min delay)