ITSUP2ME wrote: Though fundamentals in the lithium sector remain “favourable,” National Bank Financial analyst Lola Aganga warned price volatility is likely to persist through the year.
In a research report released Thursday, she upgraded her price deck assumptions in response to that turbulence, which has seen battery-grade lithium carbonate and hydroxide prices jumped 300 per cent and 260 per cent in 2021 with further gains early this year.
“Prices were buoyed by tight supply, which was exacerbated by COVID-related disruptions to freight distribution channels, Chinese restocking pre-Lunar New Year, record motive battery production in China as well as a general steady improvement in demand as developed economies outlined more aggressive ESG targets and developing economies recovered from the slowdown of the previous year,” she said.
“In 2022, we expect these factors to continue impacting the market through at least the first half of the year - since the start of 2022, battery-grade lithium carbonate and hydroxide are already up 30 per cent and 10 per cent, respectively, as domestic brine output in China has been affected by seasonal production cuts in December 2021 through January 2022. However, record prices in the last 12 months have incentivized new supply and accelerated brownfield capacity additions. Several projects are scheduled to be commissioned in the second half of 2022 and we expect incoming supply to ease market tightness and could result in cooling prices, addressing some concerns of rising material costs impeding EV cost parity – the point at which an automaker can theoretically build and sell an EV with the same margin as a comparable combustion vehicle, without the cushioning effect of green subsidies.”
Ms. Aganga touted the demand stemming from the global push for electric vehicles, expecting it to comprise 60 per cent of lithium chemical demand in 2022 and rise to 70 per cent to 2025.
“Nearly 35 countries have pledged towards sales of all new cars and vans being zero emission by 2040, as well as to set ‘more ambitious’ medium-term goals for emissions in 2030, by the end of 2022. The conclusions from the COP26 summit reinforced the underlying thesis for the green energy revolution as governments take measures to incentivize electrification in the transportation and manufacturing sectors, to meet reduced emissions targets for their jurisdictions. These developments have led to an increase in the consensus base case demand scenario for 2022 and 2023 of 57 per cent and 55 per cent, respectively.”
The analyst expects markets to be “tightly balanced” despite an estimated 220,000 tonnes of LCE capacity coming online this year and 135,000 planned by the end of 2023. She also warned of a “notable” supply deficit emerging by the end of 2025.