Bullish Lithium Narrative
Electric-vehicle (EV) makers are hoping that an imminent wave of lithium supply will bring relief for their expansion plans after a two-year squeeze, but the battery metal’s die-hard bulls warn of more pain to come if producers fail to deliver. Rampant lithium demand has caught many forecasters by surprise, with booming global EV sales causing consumption to double over the past two years. With suppliers unable to keep pace, a blistering price rally sent the total spot value of lithium consumption rocketing to about $35 billion in 2022, up from $3 billion in 2020, according to Bloomberg calculations.
Some bearish lithium-watchers say fast-growing supply, rather than dizzying demand, will be the decisive factor in 2023. Five analyst forecasts reviewed by Bloomberg point to a much more balanced global market after clear shortages in 2022, while BYD Co., China’s top EV seller, is counting on a lithium surplus. But there are many skeptics who warn of fresh tightness if miners from Chile to China and Australia hit hurdles in launching daunting volumes of new supply. The reviewed forecasts peg production increases of between 22% and 42% in 2023: a breakneck pace for any complex extractive industry.
At stake is the pace at which the world’s vehicle fleet adopts battery power. Lithium-ion battery costs rose last year for the first time in the EV era, according to BloombergNEF. Elon Musk bemoaned lithium’s “insane” rally and said high raw material costs were among Tesla Inc.’s biggest headwinds.
There’s broad agreement that lithium supply is heading for a major increase in 2023 as a wave of expansions or new projects get up and running. The more bearish voices say that supply wave will hit the market just as China’s withdrawal of generous EV subsidies causes demand to cool, creating a mismatch that could trigger a sharper fall in prices. Average prices this year are likely to fall about 8% from average 2022 levels, according to the mean of five forecasts reviewed by Bloomberg.
The divisive issue is whether less-established producers will be able to deliver in full, defying a range of regulatory, technical and commercial challenges. The extraordinary pace of lithium’s expansions – across both demand and supply – has made forecasting the market a contentious pursuit.
“2023 is when lithium becomes what I call a volume game,” said Chris Berry, president of House Mountain Partners, a consultant to the battery-materials sector. “We need to see a supply response from both existing producers and near-term producers who will need to execute flawlessly in the face of sustained lithium demand.”
Lithium prices have already come down about 20% from an eye-popping record in November, in an early sign of respite for buyers. Lithium carbonate in China fell to 480,500 yuan a ton ($71,500) on Jan. 13, the lowest since August.
While the lithium market faces uncertainty, it is clear that lithium will continue to play a crucial role in the transition to EVs and the decarbonization of transportation. The lithium-ion battery is currently the dominant technology for EVs, and as the demand for EVs continues to grow, the demand for lithium will also increase.
It is important for lithium producers to increase their production in order to meet this demand and avoid supply shortages. However, it is also important for them to do so in a sustainable and responsible manner, taking into account the environmental and social impact of lithium mining.
As the world shifts towards a low-carbon economy, lithium will continue to be a critical component in the transition to clean energy.
Lithium Americas-Top Lithium Play
Lithium Americas Corp is a stock that has received mixed reviews from analysts. The average analyst target price for the stock is CAD 46.58 over the next 12 months, which is a significant increase from its current stock price of CAD 27.75. The average analyst rating for the stock is Strong Buy, indicating that most analysts believe the stock has potential for growth. However, Stock Target Advisor’s own analysis of the stock is Bearish, with 2 positive signals and 7 negative signals. The stock has experienced a fluctuation in its stock price over the past week, month and year, with a change of +8.91%, -11.11% and -27.39% respectively.
Lithium Americas Corp is a lithium mining company that is focused on the development of its two lithium projects in Argentina and Nevada. The company’s Cauchari-Olaroz project in Argentina is one of the largest lithium brine resources in the world and its Thacker Pass project in Nevada is one of the largest lithium-clay resources in North America.
Recently, several analysts have released their updated target prices and ratings for Lithium Americas Corp.
National Bank of Canada Financial has a “Buy” rating and a target price of CAD 38.5.
However, STA Research and Deutsche Bank Capital have lowered their target prices for the stock, with STA Research now having a “Buy” rating and a target price of CAD 35 and Deutsche Bank Capital having a “Buy” rating and a target price of CAD 30.
Despite the target price reductions, the overall sentiment among analysts is still bullish on the stock, with all three analysts maintaining a “Buy” rating. This suggests that they believe the company’s projects have potential for growth and that the stock is undervalued at its current price.
The Cauchari-Olaroz project in Argentina is expected to begin production in the first quarter of 2022, which could provide a boost to the company’s revenue and stock price. Additionally, the Thacker Pass project is currently in the permitting process, and it is expected to begin production in 2025. These projects are expected to position Lithium Americas as a major player in the lithium industry.
