Re: Lithium sentiment. Hmm. I think this is a short term correction, partly because of the negative press, but also because of the unsustainable gains across the sector over the last two weeks in particular.
I’m happy to argue against the conveyed sentiment of bigger players (inc Maq bank and that article in the AFR) about trends in the industry. They’ve made (well orchestrated, and profitable?) mistakes before and I’m sure they’ll make such mistakes again.
Please note: I can’t argue my position with complete impartiality because my portfolio is disproportionately weighted with lithium stocks. However, I’d like to think that my sentiment is guided by certain macro-level trends that are playing out at the moment, rather than a desire for profit.
I’ve mentioned these catalysts on a number of occasions before:
- Governments around the world adopting a pro(only!)-EV stance
- car manufacturers announcing the end of ICE vehicle production
- rising EV sales figures
- Buses and heavy vehicle conversions happening at a rapid rate
- Tesla’s market-stoking announcements
And an interesting question to consider: Why would the Chinese (in particular) be investing hundreds of millions of dollars in certain companies, strategic infrastructure and industrial re-fits if the (near-term or projected) demand wasn’t there?
My opinion, given all the variables at play, is that the next few years will be marked by high levels of raw material demand, hampered by a slowly rising level of supply. I project that by late 2019 we will see supply start to catch up and so around that time, with increasing efficiencies and tech improvements, we’ll see the spot price fall (some are predicting it will halve by 2021).
So that’s my thinking as to why this is only a short-term correction and why we should see a generally bouyant sector as the year progresses.
So. I may not be completely impartial, but I do have a lot less to gain than those who may very well be deliberately spreading fear in the market place, so that they can take established positions at a lower level (thereby ensuring their end-of-year bonuses when the ‘unexpected’ turn-around happens later this quarter). That may be overly cynical, or stunningly accurate - time will tell.
General advice: near-term producers are your safest bet either way, so consider any Li stock with time-to-ship in mind. When can they dig the product out of the ground (or for brine, when can it be evaporated and processed)?
