Well what a tumultuous week it has been in the markets, with several babies (including Lithium stocks) being thrown out with the bathwater.
However, the fundamentally good news continues for Lithium stock holders as the Lithium price explosion marches on with no end in sight.
Lithium prices continue to rise (and rise fast) because there is simply no massive increase in Lithium supply on its way fast enough to counterbalance the exponential demand growth coming out of China and indeed Europe and the ROW right now.
Consider this:
At least 1 in 5 vehicles soldin China in 2022 (or 20%) is expected be a NEV. China is estimated to sell 27.5 million automobiles in 2022 (total) so that's ~5.5m EVs expected to be sold. For reference, ~3 million NEVs were sold in China in 2021 (up from ~1.3m units in 2020). https://www.scmp.com/business/china...account-over-20-cent-chinas-new-vehicle-sales
In Europe, the situation is even more profound. NEVs (plug-ins) accounted for 29% of new car sales in Dec 2021 (up from 26% in Nov) and if that trend continues then NEV sales in Europe are on track to reach ~4.1 million NEVs in 2022 (~35% market share), up from an estimated 2.3m NEVs in 2021. https://insideevs.com/news/563926/europe-plugin-car-sales-december2021/
It is estimated that the rest of the world sold ~1.2 million EVs in 2021 (including 700k units in the US) bringing the total no. of NEVs sold in 2021 to ~6.5 million units globally (TBC).
If China is on track to sell 5.5m NEVs in 2022, Europe sells 4.1m NEVs and the ROW sells ~2m NEVs this year, then global NEV sales units will reach ~11.6m this year.
But is this achievable given current Lithium supply and expected supply growth?
According to S&P Global Intelligence, supply for LCE is forecast to jump to 636,000 metric tonnes in 2022, up from an estimated 497,000 mt in 2021. S&P Global expects demand for LCE to be slightly higher at 641,000 mt (an increase of 29% vs 2021) but as you can see from the above NEV estimates, have they too totally underestimated Lithium demand requirements for EVs in 2022?
As mentioned above, 11.6m global NEV unit sales represents a 77% growth in NEV sales versus 2021. So how does an estimated 29% demand growth in Lithium even halfway cut it?
The answer is, it doesn't IMO. And as usual, mainstream analysts continue to underestimate the real demand for Lithium.
Consider also the following adding to the supply woes;
Therefore, if an average of 80% of total estimated LCE supply of 636k metric tonnes (mt) is considered as (and the limit) for battery grade LCE production this year, then that means only 509k mt can be used for EVs. Then we need to reduce that no. to 356k mt after a 30% loss in battery yield is accounted for.
And yet if the world is to produce 11.6 million NEVs in 2022, then it will require at least 932k mt of LCE, of which 745k mt (80%) can be considered as or converted to battery grade (BG) LCE (or 522k mt after battery yield losses). Note: My BG LCE demand figures assume an avg. 50KWh battery pack per NEV & ~45,000 mt of LCE required per 1 million vehicles produced.
So folks, by my calculations, IMO the world needs an additional 296,000 mt of LCE to come online in 2022 (on top of the 636k mt supply growth estimate that S&P Global Intelligence have forecasted). And IMO this is why Lithium prices continue to surge and I expect that to remain the case until new projects (with scale) are brought online and existing projects are significantly expanded to counter the exponential demand onslaught. And unfortunately for prospective EV buyers and OEMs, this is unlikely to happen overnight i.e. in 2022.
Little wonder then that Tesla has decided to mothball their $25,000 EV project and delay all new models until 2023. And lets be honest, Tesla are streaks ahead of their competitors in terms of addressing their battery raw material supply issues. So god help GM, Ford, VW, Toyota and the rest.
GLTA and enjoy the rest of your weekend.
Cheers
Elpha
AVZ Price at posting:
67.0¢ Sentiment: Buy Disclosure: Held
(20min delay)