Saturday, June 25, 2022

Lithium Deep Dive

From Bloomberg via, May 25:

The trouble with lithium

Elon Musk wants to mine it, China is scouring Tibet for it, battery makers are crying out for it. Lithium, the wonder metal at the heart of the global shift to electric cars, is in a full-blown crisis. Demand has outstripped supply, pushing prices up almost 500% in a year and hindering the world’s most successful effort yet to halt global warming.

The shortage of lithium is so acute that in China, which makes about 80% of the world’s lithium-ion batteries, the government corralled suppliers and manufacturers to demand “a rational return” to lower prices. Analysts at Macquarie Group Ltd. warned of a “a perpetual deficit,” while Citigroup Inc. nearly doubled its price forecast for 2022, saying an “extreme” rally could be coming.

The consequences of failure to produce enough lithium are potentially devastating. Global investment in EVs has grown faster than any other new-energy sector over the past few years, outstripping even wind and solar power. Current lithium spot prices could add up to $1,000 to the cost of a new vehicle, Benchmark Mineral Intelligence said. Along with higher prices of other raw materials, that is reversing years of falling prices as EVs race to become cost-competitive with gasoline-powered cars. If battery makers can’t get enough lithium, it would curb the expansion of clean-energy vehicles, making it harder to meet global emissions targets
“It looks like the expansion ramp up is not going to be fast enough to hit demand” over the next three years, said Cameron Perks, an analyst at Benchmark. EV makers “have been asleep at the wheel.”

The crunch prompted a characteristically blunt tweet from Musk in April. “Price of lithium has gone to insane levels!” he posted on Twitter. “Tesla might actually have to get into the mining & refining directly at scale, unless costs improve.”

Musk’s Tesla Inc. and Chinese automakers BYD Co., Xpeng Inc. and Li Auto Inc. have all already raised sticker prices, as has Contemporary Amperex Technology Co. Ltd., the world’s biggest EV battery maker. “The industry is facing very strong headwinds in terms of cost escalation,” XPeng President Brian Gu told Bloomberg TV in late March.....


Higher prices + higher interest rates for folks who don't buy for cash, or lease, means the dream of mass-market electric vehicles is receding toward the horizon, which also means the economies of scale in traditionally powered vehicles won't be matched in EV's for a few more years at minimum meaning we see headlines such as this at on June 23:

Lithium stocks rout continues despite fresh hard rock price record

And see stock action like this in the two largest miners, Albemarle :

and Sociedad Quimica y Minera:

Both charts from FinViz, also on blogroll at right. 

Some Instanalysis on Albemarle: Despite the series of higher lows over the last three months, the stock, following Friday's 5% up move is getting close to filling that big gap made on the way down earlier in the month and if I were a betting man I'd be more apt to go short to fade a gap-fill somewhere in the next 15 points than I would be to wager the industry's problems are behind it and go running to the parimutuel window with cash in both hands.

But that's just me.

And the guy I actually saw running to the window with c-notes in each hand.

The preferred scenario is, of course, to be running  from the betting window, with fistfuls of currency.