"One of the major takeaways from the report, is that Morgan Stanley stipulates a required rate of 31% of all new cars sold being of the electric variety, for the current rate of lithium supply to balance with demand."
"The bank says the current rate of new electric cars sold is only around 2% and would have to rise significantly to at least 31% by the year 2025 to “clear the market.”"
"Morgan Stanley’s report goes on to forecast spot lithium prices to fall by around 45% by 2021 on the back of around 500,000 tonnes per annum (tpa) being added to global supply by 2025."
"Morgan Stanley forecasts the price of lithium carbonate will fall from US$13,375 per tonne to $7,332 per tonne by 2021, and then towards its marginal cost of production at $7,030 per tonne thereafter."
That is mostly based over SQM's proposed upscaling of production, if you research further, you will see the situation in Chile is far from cut and dry, and there are some serious obstacles around them getting to those levels. It is far from a simple scenario.
That article brought out too many rebuttals to count.
"Don’t usually comment on forecasts but the Morgan Stanley lithium one is ridiculous. When you understand even the basics of lithium, cathode and battery plants, and auto majors plans you realise the Morgan Stanley scenario has a 1 percent chance of happening,”
Benchmark Mineral Intelligence Managing Director Simon Moores said."
"In a recent research note, analysts at Benchmark explained the main factors investors should keep an eye on when discussing potential oversupply in the market.
According to the London-based firm, lithium prices are likely to move towards convergence rather than a crash, as the fundamentals of the lithium industry have not changed.
“Quite simply, to impact the battery grade lithium carbonate and lithium hydroxide prices, battery grade product has to be produced and sold to cathode and battery makers,” Benchmark said."
"Lithium expert Joe Lowry also said that by predicting a steep lithium price decline the analysts at Morgan Stanley have proven they don’t understand supply, demand or the cost curve."
"Energy metals analyst Chris Berry commented on the report as well, saying that there is a low probability — though not zero — for the bank’s forecast to come true.
“A LOT has to happen for this to come true: supply ramp successfully, conversion capacity ramp successfully, EV sales underwhelm, etc,” he said."
Even so, Morgan Stanley’s report boosted fears of potential oversupply in the market, with major producers’ share prices plummeting on Monday (February 26).
So, that is what I have to say about your theory. It is a possibility, but one I view as having a low probability. The market in my view has already priced in the potential probability for an oversupply in the future, with the majority of Lithium explorers struggling SP wise this year.
My counter argument for whether the SP moves up from here is very simple. Mining exploration companies can rise in value over the value of their resources, or perceived potential value. We currently have none properly defined, the current SP is speculation over what potentially is there. When it is better defined this year, the SP should move, satisfactory/good results moving it upwards upwards, poor results moving it downwards.
I hold, so you know which way I am betting the results show.
Counter arguments are very welcome.
Have a nice weekend, sorry for the long post .
4CE Price at posting:
8.0¢ Sentiment: None Disclosure: Held
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