Running discussion on SP, page-63921

Lithium on the march:

It’s been a tough week for markets with almost everything in the red because of fear of inflation and worries of rising interest rates.

In particular,Rio Tinto Ltd [ASX:RIO]shares got hit by a double whammy.

Yes, there was the wider market sell-off…

But Rio’s share price also took a hit late last week after Serbia revoked Rio’s lithium exploration licences for their Jadar project.

Rio had high hopes for Jadar.

The project is one of the largest greenfield lithium projects in the world that at peak capacity could produce around 58,000 tonnes of lithium carbonate.

But also, because the project would have boosted Europe’s lithium production. If the project had gone full steam ahead, it would have accounted for about 27% of Europe’s lithium production by 2030, according to Benchmark Mineral Intelligence.

As S&P Global reported:

Europe has been working hard to create a battery supply chain because well…cars in Europe are big business, they make about 7% of the EU’s GDP.

Especially as the share for electric vehicle (EV) sales continues to grow.

EV sales show impressive growth

In December, for the first time, EV sales were higher than diesel cars in Europe.

If you’ve ever been to Europe, you know that diesel cars are — or were — pretty popular. In fact, I really struggled to sell my gasoline car when I moved to Australia in 2015. All the buyers wanted diesel.

At that time, diesel cars made up about half of new cars sold in Europe. And while they’ve fallen out of favour in recent years, they still make a large chunk of car sales, about 32% in 2019.

So this is an impressive milestone.

As theNew York Timesput it:

Yep, it’s something that we’re seeing everywhere. That is, EV sales growing faster than petrol and diesel cars.

In the US, while new car sales increased by 3.2% in 2021, EV sales increased by 87%.

Even in Australia, while overall car sales went up by 14.5% in 2021, EV car sales saw an increase of a whopping 191.1% from 2020.

And it’s something that’s certainly happening in China, the largest EV market in the world. While new auto car sales increased by 3.8% in 2021, EV sales in China increased by 160% from the previous year.

What’s more, in the month of December alone, China registered 400,000 EVs, a 35% month-on-month increase, according to the China Automotive Technology and Research Center.

Granted, EVs still make up a small number of overall car sales, however, this is impressive growth and one that’s accelerating.

And, of course, all this is hitting lithium prices.

Lithium prices could continue to soar in 2022

We saw lithium prices skyrocket in 2021. And, with lithium in high demand and supply not keeping up, it doesn’t look like prices will ease anytime soon.

In fact, lithium prices are soaring.

Bloomberg has even declared lithium has hit ‘ludicrous mode’. As they wrote:

With EV car sales accelerating demand, it appears lithium can only go up.

So while lithium stocks may have tumbled alongside the overall market, the future is looking good for the white metal.

Until next week,

Selva Freigedo,