Excerpts from latest articles on the lithium sector. Shared by Teo Luan Boo

TeoLuanBoo5.19I am an investor focused on the Electric Vehicle theme with a special interest in lithium, which is one of the key battery material minerals. As a shareholder of Alliance Mineral Assets, I constantly keep myself up-to-date on all things happening in the lithium sector. Through these excerpts (which I hope to share regularly), I hope more investors can keep up with developments in this exciting and fast-evolving space.

What’s Driving The Electric Vehicle, Lithium, And Battery Markets In 2019?

How Strong are Electric Vehicle Sales?

Although global auto sales slowed by over 2% during the first quarter of 2019 relative to a year prior, sales of electric vehicles soared by 57%. These numbers are expected to continue to grow rapidly as battery costs fall, technology advances, consumer preferences evolve, and the regulatory environment supports low-emission vehicles.

As the world’s largest auto market and a key proponent of electric vehicles, China continues to play a central role in EV adoption. Despite reduced subsidies, China continues to solidify its leading position in EVs with other forms of supportive policies.

What Will Drive EV Adoption?

While early adopters of EVs have been drawn to the low emissions and/or performance characteristics of high-end EVs, mainstream EV adoption will ultimately be driven by economics – the cost competitiveness of EV ownership versus ICE vehicles. It’s important to note that an EV’s price tag is primarily driven by the cost of its battery setting a trajectory that should allow EVs to reach price parity with ICE vehicles by the mid-2020s when EVs become noticeably cheaper than ICE vehicles by 2030, economics should trump consumer inertia. Estimates suggest penetration rates could range from 20% to 50%.

Should the Market be Concerned about Supply?

Our view is that increasing lithium supply by four times current levels by 2025 is likely to face many challenges, including: 1) Given the concentration in the industry, lithium majors will continue to implement strategies to prevent new entrants from flooding the market; 2) Given the complexities of extracting lithium and bringing it to market, it takes time, expertise, and even luck, to bring on substantial supply in a timely manner; and, 3) In some key regions, regulators have rejected lithium capacity expansion plans. Read more…



Electric cars estimated to be cheaper than regular cars by 2022

Every year BloombergNEF, a research company, analyses the cost of purchasing an EV and compares it with the cost of a fossil-fueled vehicle of the same type. The company estimates the crossover point at which EVs become cheaper than regular combustion engine powered cars. The point has been changing rapidly: In a recent blog post, BloombergNEF energy analyst Nathaniel Bullard notes that in 2017 the point at which an electric vehicle would become cheaper than a combustion-engine vehicle of the same size was estimated to be 2026. Last year that closed to 2024, and he says the latest analysis suggests it’s now 2022 for large vehicles in the European Union.”  Read more…


Battery Shortages Are Already A Problem, And Electric Car Waiting Lists Are Becoming The Norm

Reports of battery supply constraints in 2019 and electric car waiting lists. Evidence from Tesla, Audi, Hyundai, LG Chem and SK Innovation.

Bloomberg now says electric cars will be cost competitive with ICE starting from 2022, Deloitte says as of 2021 in the UK and globally by 2022.

Positive cycle: Cheaper electric cars boost demand —> higher demand (sales volumes) leads to even cheaper electric cars –> even higher demand for electric cars. Read more…



How much does lithium cost? The industry can’t seem to agree

Unlike for copper or other metals used to make electric cars, there is no traded price for lithium. The London Metal Exchange is working to develop a tradable price for the white metal, but until then, the industry’s investors, customers, analysts and executives are left without a full sense of the global market.

Even with the price uncertainty, though, demand is spiking. Toyota Motor Corp, for example, plans to have half of its global sales come from electric vehicles by 2025.

But smaller and mid-tier players are finding it difficult to procure funding as potential financiers balk without a tradable lithium price, which would let them hedge their investment. Read more…



LITHIUM’S SECOND COMING – Cycles of the Giant

Perhaps one of the most difficult areas for investors. Why do prices surge and suddenly crash in a growing market. It makes no sense, right? Wrong !

We do have a big problem with the large reporting houses. They tend to be purely fact based, and facts alone are a poor way to read high growth markets. While they can work quite well in isolation for a market like iron ore, they can be hopelessly inadequate for Lithium. In this article we outline what we see as the major parts to investment cycles in a high growth market like lithium.

8. A trigger point creates a turning point in the market.

This trigger point brings us to last week's announcement by Wesfarmers. It’s why it was such a yes moment for us. We knew something was going to come and this was exactly what we were looking for. For me we have entered the early stages of the next cycle. We feel well prepared and our confidence level is well above average.

9. Sentiment Turns and danger arrives

So we’re at level 8 now. Level 9 will create a whole new investor sentiment. Greed will take over from fear and most investors will repeat the same mistakes of the previous cycle. Human emotion is controlled by fear and greed, and it’s well known and said by many. The issue is whether you can overcome emotions that come naturally and become pragmatic. When valuations skyrocket, will you always ask for more or take some off the table? How much you remain exposed, and at what price you sell some or all, become future struggles. Read more…



China goes all out to secure lithium, cobalt supplies – key to dominating the world electric car market

The emergence of electric vehicles has seen Chinese companies go on a global hunt to secure lithium resources. Now they are rapidly clinching deals to get hold of cobalt whose supply is even more concentrated geographically.

“China has gone further than any other country to secure the raw materials it needs to power its new energy vehicles, including acquisition of mines,” said Fortune’s investor relations manager Troy Nazarewicz. “By increasing its control over cobalt supply, it is effectively controlling the lithium-ion battery industry to become the world’s electric vehicle production centre.” Read more…

 

Lithium M&A Heating Up Despite Trade War

After several months without a significant deal, a lithium exploration company (Bacanora Minerals) and a lithium producer (Alliance Mineral Assets) are the latest investment targets, as demand for the white metal crucial for the manufacture of lithium-ion batteries continues to soar.

The current M&A we are experiencing in the lithium space is interesting for the fact that it’s coming at the same time as the screws are being tightened on both the lithium and rare earths markets – US exports of both are now subjected to Chinese import tariffs.

However the trade war is really just a smoke screen for what’s actually occurring in lithium – a further locking down of lithium supplies by China. If things get uglier on the trade front, there’s nothing stopping China from slapping an embargo of its processed lithium, or lithium-ion batteries, on US lithium consumers, thereby hurting US companies that rely on these products. Read more…

 


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