A few months ago, Chile’s second largest lithium producer, Albemarle Corp. (NYSE: ALB), warning that global lithium supplies were in flux for a major shortfall in a few years if prices fail to reflect the costs of financing massive expansions amid the EV boom. In particular, ALB highlighted the chasm between discount hunting manufacturers and lithium manufacturers who were unable to meet growing demand with consistently low prices.
But perhaps Eric Norris, Albemarles lithium’s business operations manager, rushed his fences: Lithium carbonate prices have nearly tripled since they plunged into perennial lowlands of $ 29,800 per tonne in July 2020. Lithium carbonate is a critical component in lithium ion production. batteries for electric vehicles.
And now another giant lithium maker is dancing to the same tune.
Lithium Jiangxi Ganfeng, the world’s largest lithium mining company with a market capitalization of $ 19 billion, says lithium prices will continue to pick up as lithium production struggles to keep up with massive demand for EV. The Chinese company has a worthy credibility – after all, it lists the major EV manufacturers, e.g. Tesla Inc. (NASDAQ: TSLA) and BMW (OTCPK: BMWYY) among its customers.
Ganfeng Lithium reported net income of 1.025 billion yuan ($ 156 million) in 2020, a major improvement in 2019 partly due to gains on the fair value of financial assets such as equity, but also due to strong demand for battery-grade lithium.
Investors started pouring in lithium years ago, anticipating the same supply crisis that Ganfeng Lithium and Albemarle are warning is now approaching. They jumped at gunpoint then, partly out of the enthusiasm of the weak times, and partly because the logic worked this way: Any new lithium mine that could contribute to the EV battery attack would take years to bring online, from scratch – the better to start in advance.
Now, with the EV boom completely in the mirror of the front view, and with the gigafactors of the battery promising to be hit hard buyers, we can finally see the much-anticipated supply crisis take shape.
Battery-grade lithium carbonate prices began to decline a three-year decline during the second half of 2020 thanks to strong EV demand returned by the coronavirus. Lithium carbonate prices have gained 67% so far in 2021 and 224% over the last 12 months.
This is largely due to the delay in the expansion of the lithium project in South America – due to previous demand forecasts, as well as the impact of the pandemic. This is expected to slow down the short-term supply of the lithium component and improve prices, according to Ganfeng.
Source: Trade Economics
Ganfeng expects his massive Cauchari-Olaroz lithium salt lake project in Argentina to produce 40,000 tonnes a year of lithium carbonate when it goes online in the first half of 2022.
The current Ganseng boasts an annual capacity of just over 120,000 tonnes.
Looking further ahead, the company hopes to establish a lithium salt capacity of at least 600,000 tonnes of lithium carbonate (LCE) equivalent per year, good for a 400% increase.
That alone should give you an idea of how strong these companies are in lithium, thanks to global EV drive and electrification.
But lithium manufacturers like Ganfeng, Albermale and Sociedad Qumica y Minera de Chile SA (NYSE: SQM) can also thank another powerful force working in their favor – a global commodity bull market.
Bloomberg Commodity Index
A cross section of Wall Street luminaires from Pimco to Point 72 has envisioned an extensive collection of goods thanks to the so-called reflection trade. Indeed, Wall Street is anticipating a new one commodity bull market that will rival the oil price points of the 1970s or the China-led boom of the 2000s. Market experts, including Goldman Sachs, believe the commodity boom could rival the last superbike in the early 2000s that enabled development BRIC economies (Brazil, Russia, India and China).
Iron and copper ore prices are already trading at higher perennial levels, while global oil prices have rebounded strongly from historically low levels.
Lithium, oil and copper are expected to be among the biggest beneficiaries of new bull goods market.
By Alex Kimani for Oilprice.com
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