Lithium producers in favour as electric vehicle sales surge

Resources companies with lithium production capabilities are increasingly coming into favour, as a supply crunch for the battery metal looms amid surging electric vehicle (EV) sales. The latest report by the International Energy Agency (IEA) revealed there were 10 million EVs on the world’s roads by the end of 2020, with EV registrations rising by 41% - despite global car sales falling by 6%. Though China has the world’s largest EV fleet with 4.5 million, 2020 was the first year in which Europe overtook China in new EV registrations, with 1.4 million compared to China’s 1.2 million. Lithium prices keep going up The ever-increasing demand for EVs of course requires increased supplies of battery metals, including lithium, which saw its value skyrocket in 2020 and this appears to be ongoing. According to Trading Economics, which provides lithium pricing based on spot prices for battery-grade lithium carbonate traded in China, lithium has gained 91% this year, to ¥89,000 per tonne. No commodity tracked by Trading Economics has risen anywhere near as much since 2021 began. Meanwhile, lithium hydroxide has risen to US$13.25 per kilogram, and spodumene, an important source of lithium, is up to US$610/tonne. EVs more popular than ever The IEA attributed the EV sector’s resilience to supportive regulatory frameworks, additional EV incentives for consumers and businesses, expanding EV models and falling battery costs. In further good news for lithium producers, who will help to feed the next generation of batteries and energy technology, 18 of the world’s top 20 vehicle makers have announced plans to rapidly scale production of EVs. Consumer spending on EVs reached US$120 billion last year, up 50% on 2019, and in the first quarter of 2021, EV sales rose an astonishing 140%. The IEA predicts total sales to reach 145 million by 2030, or 7% of the world’s road vehicle fleet, but has forecast sales of 230 million, or 12% of the total fleet, by that date if governments take stronger action to curb emissions. Should the latter figure be met, greenhouse gas emissions would reduce by two-thirds, compared to an equivalent internal combustion engine fleet. Battery gigafactories, where batteries for EVs are made and stored, reached 181 by the end of 2020, a 5,933% increase, and Volkswagen has announced plans for six 40GWh cell plants in Europe. All of this has Macquarie analysts predicting the lithium market to be in deficit from 2022. Where will the lithium come from? Lake Resources NL (ASX:LKE), which aims to sustainably produce clean quality lithium carbonate from Argentina for the fast-growing battery market, is one of several Australian lithium hopefuls. Lake managing director Steve Promnitz said higher lithium prices reflected a lack of investment in new capacity, with the market finally catching up to the lack of supply. Lake’s growth plans “We have been saying for some time that supply would lag demand growth and that’s exactly what’s occurred, with prices now reflecting this economic fundamental,” he said. “Put simply, we need around seven companies the size of Sociedad Química y Minera de Chile SA (NYSE:SQM) every year for the next decade just to meet the demand growth – there is enormous demand for battery-grade product, but just not enough supply.” “Having demonstrated our ability to produce a high purity, battery grade product, we look forward to expanding our projects, not only at Kachi but also at Cauchari, Olaroz and Paso, becoming a globally significant producer of this crucial resource. “Interest in Lake, lithium and the EV revolution is escalating and for good reason.” Lake Resources recently expanded its Kachi drilling to support future production increase amidst strong demand for sustainably produced lithium. “Our product ticks all the sustainability and quality boxes and we are operating in the right location at the heart of the Lithium Triangle,” Promnitz said. “There’s never been a better time to switch onto Lake as we ramp up our growth plans for 2021 and beyond.” Other players Infinity Lithium Corporation Ltd (ASX:INF) (FRA:3PM) has been impressed by the continuing commitment by the European Commission (EC) to develop self-sufficient lithium supplies to service Europe's burgeoning electric vehicle transition. The company recently met with the EC vice-president Maroš Šefčovič and presented the San José Lithium Project in Spain during the European Battery Alliance (EBA) Day in Madrid. Anson Resources Ltd (ASX:ASN) (FRA:9MY) increased the exploration target at its Paradox Brine Project in the US following a review of historical drilling data that confirmed a massive, supersaturated brine aquifer in the Mississippian Leadville Formation within the project claims at a depth of around 8,000 feet. Piedmont Lithium Inc (ASX:PLL) (NASDAQ:PLL) (OTCMKTS:PDDTF) is making strong progress with the first US greenfield lithium project in more than 50 years, as it becomes a US company. European Lithium Ltd (ASX:EUR) (FRA:PF8) (VIE:ELI) is adding to its strategic lithium endowment in the heart of Europe after entering a Collaboration Agreement with Jadar Resources Ltd (ASX:JDR) (FRA:R1E) on its Austrian tenements. Core Lithium Ltd (ASX:CXO) (OTCMKTS:CXOXF) continues to drive its Finniss Project in the Northern Territory towards production and has this week executed a five-year operating agreement with Darwin Port Operations Pty Ltd for the export of lithium products. And Lithium Australia NL (ASX:LIT) (OTCMKTS:LMMFF) (FRA:3MW) is busy with its value-adding battery metals technology while also welcoming the start of fieldwork by Galan Lithium Ltd (ASX:GLN) at Greenbushes South Lithium Project JV, south of Perth in Western Australia. - Daniel Paproth