Lithium: A Running Theme in 2022

In today’s Money Morning…it’s no secret EVs are cheaper to run…EV uptake is happening faster than expected…Aussie companies have been pouncing at the opportunity…and more…

Dear Reader,

$1,166.28…that’s the amount I would save annually if I switched to an electric car.

That’s at least according to the Electric Vehicle Council cost calculator. You can check your own savings here.

It’s no secret EVs are cheaper to run — they have fewer moving parts. But they do cost more upfront.

The ACT is looking to help with that.

They recently launched a government program that gives interest-free loans to drivers looking to buy a new or used electric vehicle. These are 10-year loans for an amount of up to $15,000.

The plan is part of the Sustainable Household Scheme that offers loans with no interest for things like home batteries and solar panels.

And the loan is part of other benefits they are offering to increase EV uptake, such as a stamp duty waiver, along with free vehicle registration for two years for new or used zero-emissions vehicles.

All in all, it’s working.

EV numbers in the ACT have already doubled since last year to 1,304.

But the point of the new program is not only to increase the number of EVs, but also to send a clear message to carmakers. From The Guardian:

Shane Rattenbury, the ACT minister for water, energy and emissions reduction, said the territory wanted to send a strong signal it was embracing the transition to electric cars, both domestically and to carmakers abroad.

“The key message here for the external audience is for automakers to say – look at Canberra, get the vehicles into the ACT,” he said.

“We’ve got a keen market here. We know people want to purchase these vehicles. We need to see more models at lower prices.”

Rattenbury, who drives an electric vehicle, said the federal government “has not been strong supporters of EVs” so it was important for state and territory governments to make their intentions clear.

“Nationally, we do have a problem,” Rattenbury. “When you talk to the automakers, they’re hesitant to bring vehicles to Australia because they’re unclear about government policy.”

The truth is that while things have been moving slowly in Australia in regard to EVs, numbers are growing.

In the first six months of 2021, Australians bought more EVs than in all of 2020.

And the numbers should keep increasing.

Australia’s two largest states — Victoria and NSW — have set a target to have more than 50% of new car sales be electric by 2030. This would mean that an estimated 30% of all new car sales would be electric in Australia by 2030.

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EV uptake is happening faster than expected

Globally, things are moving faster.

EV sales (which include plug-in hybrids) were 7.2% of global car sales in the first half of 2021, up from 4.3% in 2020. BloombergNEF expects 2021 to be a record year for EV sales.

Fastmarkets estimate EV penetration will get to 15% by 2025 and to around 35% by 2030.

All of that demand will need more lithium….

It’s why lithium prices have been going vertical…and continue to climb.

According to Benchmark Mineral Intelligence, courtesy of NXTmine:

The Benchmark Lithium Price Index rose by 4.4% m-o-m in November, which alongside rising demand, was driven by expectations of a widening supply deficit into the New Year and continued international demand growth in Q4 2021. High prices and robust demand gave way to a stream of investments into the lithium value chain in November, in particular, Chinese incumbents striking deals with western companies in pursuit of supply expansions.

Lithium carbonate prices in China are trading at 204,500 yuan a tonne. That’s a 320% increase this year and higher prices than the last lithium boom in 2018.

While EV uptake in Australia may not be catching on as fast as we’d like, we do have a lot of lithium…

Aussie companies have been pouncing at the opportunity

As an example, take Liontown Resources Ltd [ASX:LTR]. The company has recently undertaken a $450 million raise to develop their Kathleen Valley lithium mine earlier than planned and is looking to go into production by 2024.

Bloomberg reports that five out of the 10 largest capital raisings in ASX mining companies, over the September quarter, came from companies developing either lithium or cobalt — both metals needed in the energy transition.

Obviously, the more the price of lithium runs, the more producers will get into the market, and at one point, supply will catch up.

But it’s not looking likely to happen anytime soon.

For one, it takes time to bring a mine into action.

And then, even with more lithium coming into play, will that be enough?

Fastmarkets estimate that to meet that demand, lithium production will need to quadruple this decade, from 345,000 tonnes in 2020 to two million tonnes by 2030.

That’s a lot of lithium…

In this lithium boom there will be winners and losers, so stock selection will be crucial.

But lithium, batteries, and EVs have been one of the dominant themes this year — and expect them to be a recurring theme in 2022.

Until next week,

Selva Freigedo Signature

Selva Freigedo,
For Money Morning

PS: Selva is also the Editor of New Energy Investor, a newsletter that looks for opportunities in the energy transition. For information on how to subscribe, click here.


Selva Freigedo is an analyst at Money Morning. She has a background in financial economics, but what makes Selva´s experiences different to many are the places she has lived and worked. Born in Argentina, she has also lived in Brazil, the US, Spain, and now Australia. She has seen up close many of the economic phenomena that worry Fat Tail Investment Research readers, like hyperinflation, bank bail-ins and governments burdened with so much debt it cannot possibly be repaid.

Every week, she goes through each article, research note and recommendation produced by our experts around the world to give you information on how to build and protect your wealth. Selva packages the week’s best ideas into one easy to read report: Port Phillip Insider Extra.


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