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Outlook of Lithium

Team Veye | 20 Mar 2018

Outlook of Lithium

With the demand for electric cars continuing to grow in 2017-18, owing to the regulatory requirements put in place by Governments of various countries across the globe, lithium, a key metal used in the batteries that power them, performed well beyond expectations.

This demand has instigated a surge in the metal prices owing to Investor interest, making the stock prices jump over 100% in 2017. And it has also triggered another debate as to what will happen to lithium in 2018. Overall, market participants continue to be optimistic about lithium’s future. With Lithium megafactories up at 26 from just 3 in 2014, one can easily gauge the future of Lithium. The global lithium-ion battery demand is expected to grow between six and seven times by 2026, which will require a battery pipeline of nearly double what exists today.

Quite simply, there’s not enough supply to meet the demand, and the demand is increasing quicker than the supply is. Therefore, lithium’s prices are likely to remain strong for some time. Looking ahead to the rest of 2018, supply constraints look set to continue as the lithium demand forecast rises.

China is the leading market player for electric and hybrid cars, accounting for half of global sales. The global push to roll out electric cars has been amplified by concerns over air pollution and with the world's second-largest economy keen to develop the industry within its own borders, China is looking to import a lot more lithium. Lithium is coming of age in a big way. It's the core ingredient to 99% of electric vehicles and as a result, demand is going through the roof. As demand for electric vehicles skyrockets, Chinese firms have rapidly been making deals in a bid to secure supplies of lithium — a vital component used in batteries for electric vehicles.

Looking over to supply, many existing producers are seen expanding production in 2018 like Albemarle in Chile and hard-rock producers in Western Australia. Pilbara Minerals (ASX:PLS), which expects to be in production by the second half of 2018, but it will likely be 2019 onwards before these companies reach significant volumes. Chile has already lost market share to higher-cost mines in Australia over the past two years due to a rapid increase in demand, especially from China, the world’s largest electric car market. As per some industry experts, more hard-rock lithium supply from Australia is expected to hit the market in 2018, with a wave of brine supply following later in 2019, so we don’t see any real moderation in pricing until the end of  2018 at the earliest.

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