Spodumene Price, page-110

Lithium Price Tipped To Rise After Warning Of ‘Perpetual Deficit

Tim Treadgold

If you’re investment portfolio is not exposed to lithium, a key metal in the batteries which power electric vehicles (EVs), then consider the price effect on a commodity said to be heading for a “perpetual deficit.”

That remarkable description of surging demand for lithium as EV sales accelerate incorporates the second price driver, a lack of supply response from the world’s major lithium miners.



Sign of the times, Electric Avenue at the North[+]



Two investment banks this week upgraded their assessment of lithium in light of the increasing demand and sluggish supply growth with both upgrading their price forecasts for the metal.

Macquarie Bank was first to alert clients about how the lithium market is emerging faster than expected from a slowdown which started in 2018, triggering a 75% fall in the price of lithium hydroxide from $20,000 a ton to around $5,000/t at this time last year.

Since that low point was reached, lithium has recovered to around $10,000/t, but remains below what produces require to “incentivize” investment in restoring mothballed mines and processing plants or invest in new projects.

Stationary Storage Matching EV Lithium Demand

Macquarie said a fast-developing second market for lithium, stationary energy storage systems, had encouraged it to make “material upgrades to forecast demand for lithium over the short and medium term.”

Credit Suisse echoed Macquarie’s buoyant lithium analysis advising clients earlier today that it would be “brave to resist lithium momentum,” adding that it was interesting to question whether lithium was a mining or technology investment.

“Lithium prices have risen sharply since February and we do not believe it is temporary,” Credit Suisse said.

“Following production cuts (when the price crashed), the lithium supply glut has ended and the market is now tightening as the EV revolution accelerates,” supported by the global commitment to decarbonization.”

Credit Suisse said lithium demand might treble by 2025 from 2020 levels and supply would be stretched to meet that demand, but higher prices were needed to “provoke the required supply response.”

Tesla Powerpack and other stationary battery[+]

GETTY IMAGES

Macquarie said its upgraded outlook for battery demand in both EVs and energy storage systems was more than offsetting the small supply increase.

“We now forecast a wider market deficit for lithium in calendar 2021 than previously,” Macquarie said.

“The deficit is expected to grow in calendar 2022 and widen further in 2023 before some supply response starts to close the gap.”

But, the supply response could be too little, too late to contain the lithium price.

Long-Term Perpetual Deficit

“In the longer term, we believe the lithium market is likely to be in a perpetual deficit,” Macquarie said.

“As a result lithium prices are expected to continue to rise, moving to an incentive price by 2024.

“Some new supply additions should temporarily lighten the market in 2026, however beyond 2027 the supply deficit should widen significantly.”

Macquarie said this year’s deficit would be a modest 2900t, rising to 20,200t next year and then up 61,000t in 2023.

Credit Suisse’s deficit estimate closely follow those of Macquarie’s, but it stretched its forecasts out into 2024 and 2025, when the lithium deficit is forecast to be 117,000t and 248,000t, respectively.

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Tim Treadgold