And everyone needs to look past the current ridiculously low Lithium price.Maybe we'll be lucky and the Li price will stabilize.
Sprott Special Report
Top 10 Themes for 2024
BY PAUL WONG AND JACOB WHITE | TUESDAY, JANUARY 16, 2024
https://sprott.com/insights/special-report-top-10-themes-for-2024/#8. Turbulent Lithium Market Benefits MinersThe lithium spot price fell sharply in 2023, ending the year down 81.95% at $6.16/lb. This contrasted with lithium miner stock prices, which saw a smaller decline of 20.15%. The lithium spot price has been extremely volatile as it descended from unsustainable highs in 2022, but by the end of 2023, it was still 2.4 times higher than its 2020 low (see Figure 5). Inventory destocking and lower-than-expected EV sales drove down this immature market. Crucially, the EV slowdown was not an outright decline but a deceleration in strong growth. Global EV sales in 2023 are estimated to be 14 million (up 40% from 2022), and 2024 sales are forecasted at 18 million (up an additional 29%).The precipitous decline in the lithium spot price halted in December 2023 as the price intersected further into the cost curve. The current price now poses a threat to higher-cost projects under development and to the supply of higher-cost, low-grade lithium (lepidolite) from China. In 2024, both supply and demand are forecasted to increase significantly. As the decade progresses, the long-term fundamentals will likely remain intact, given the challenge of meeting the ambitious demand requirements of net-zero by 2050.Lithium miners are likely poised to benefit, especially as deglobalization spurs reshoring and friend-shoring. Both China and the West need to invest in their supply chains to secure future supply. For example, the U.S. Inflation Reduction Act of 2022 incentivizes the production of lithium in North America and friend-shoring with tax incentives and investment funding. Weakened lithium prices could propel robust mergers and acquisitions activity to continue into 2024. The likelihood of a restrained rise in the spot price and the prospect of lower interest rates could also bolster this capital-intensive sector.
