There’s Still a Lot of Appetite for Lithium

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Let’s leave behind all the gloom and doom today and focus on (still) one of the most exciting corners of the market…lithium.

This last month has been a bloodbath.

Copper…gold…nickel…even oil prices have all fallen in the last month.

And although things have been quite bearish when it comes to lithium stocks since Goldman released its report in late May, lithium prices have levelled off and are still at record highs.

There’s still plenty of interest in lithium out there.

The latest Pilbara Minerals Battery Metals Exchange (BMX) lithium auction got 41 bids and ‘strong interest’, according to the company. Pilbara started selling lithium on the BMX platform as a way to keep up with rising lithium prices.

Although the price they got this time was slightly lower than last time, by around 2.5%, this was still a 420% increase from their first auction this time last year.

What’s more, Chinese companies have continued to invest in lithium supply as EV sales climb.

This week China’s Ganfeng Lithium, who last year went on a bidding war to buy Millennial Lithium Corp, said it’s buying Lithea for US$962 million. Lithea has the rights to two lithium salt lakes in Argentina.

And this week, too, Zulu lithium mines in Zimbabwe — a subsidiary of Premier African Minerals — chose Suzhou TA&A Ultra Clean Technology Co as an investor. Suzhou will put in US$35 million to build a pilot plant to produce up to 50,000 tonnes of spodumene concentrate a year.

China is the biggest EV market in the world….and EVs have been going strong over there.

EV sales in June increased by 130% from a year ago to 532,000, a new monthly high. Total sales for the first half of the year are in at 2.24 million.

To give you a reference, in all of 2021, there were 3.31 million EVs sold in China. So it’s looking like China could comfortably pass last year’s numbers.

But, of course, China isn’t the only place where EV sales are surging despite inflation, semi-conductor shortages, and supply chain disruptions.

The US may have just hit an EV ‘tipping point’

While in the second quarter of the year, new car sales in the US slumped from this time last year, EV sales have increased 13% from the previous quarter and 66% year-on-year.

What’s more, according to Bloomberg, EVs in the US could have passed a ‘tipping point’.

As they said:

The US is the latest country to pass what’s become a critical EV tipping point: 5% of new car sales powered only by electricity. This threshold signals the start of mass EV adoption, the period when technological preferences rapidly flip, according to the analysis.

For the past six months, the US joined Europe and China — collectively the three largest car markets — in moving beyond the 5% tipping point. If the US follows the trend established by 18 countries that came before it, a quarter of new car sales could be electric by the end of 2025. That would be a year or two ahead of most major forecasts.

Many disruptive technologies don’t move linearly. Instead, they often follow something that’s called the S-shaped adoption curve, where in the early days, they take a while to be adopted, then there’s a point growth accelerates exponentially until adoption drops off.

So we could see a faster acceleration into EVs than expected, particularly as oil prices remain high.

A recent AAA survey found that a quarter of Americans are likely to buy an EV as their next car. The main reason is high fuel prices.

There’s plenty more pushing the trend, though. Governments are looking to ban petrol car sales and switch to EVs, and carmakers are releasing more models to choose from.

Keep an eye on lithium stocks

Inflation coming in hot in the US this week has investors rattled.

We could see some volatility hitting the markets in the next few months as central banks hike rates more aggressively to tame inflation.

But the long-term narrative for electric vehicles and lithium hasn’t changed. So it’s not a bad time to start making a list of lithium stocks to buy once things start looking up.

This is a long-term trend that’s only getting started.

Until next week,

Selva Freigedo Signature

Selva Freigedo,
For Money Morning

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.

About Selva Freigedo

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…

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