Almost all modern batteries are built on rare metal lithium. Batteries have been around for a long time, but the most recent driver of increased demand for lithium-ion batteries has been electric vehicles ("EVs"). Lithium miners have stepped up their game and produced larger quantities of lithium than ever before due to the current rise in demand. While this originally drove up the price of lithium since the supply couldn't keep up with the growing demand, the price was later brought down as production started to catch up with and then surpass the demand. This article will go over the expansion of lithium's supply, its demand shortly, and what it implies for lithium's price. I'll also talk about potential investment possibilities depending on future lithium pricing. Even those who find this market to be utterly alien after this essay will be equipped with the knowledge necessary to make informed choices in the lithium industry.
Quickly Expanding Market
The popularity of EVs has fueled a sharp increase in the demand for lithium in recent years. Cars are replacing their internal combustion engines ("ICE") with electric motors and battery packs all over the globe, but China is undoubtedly setting the pace. In 2018, 4% of cars sold in China were electric vehicles (author's estimations based on 28 million overall sales and 1.1 million EV sales). However, this percentage is forecast to soar to 25% in 2025 rather than the previously anticipated 20%. This 25% of sales would result in 8.75 million EV sales in China alone for a market that is anticipated to grow to 35 million cars by 2025 from 30 million in 2020. But China is not by itself. After 17.2 million sales in 2018, the United States, the world's second-largest single-country market, is predicted to reach 17.7 million in 2025. Despite the slower pace, 1.4 million EVs will be sold in this market by 2025. Recent legislative attempts have been ineffective, but they aim to boost this by increasing EV incentives for customers.
By 2025, it is anticipated that 6.3 million EVs will be sold in Europe, surpassing US EV sales but far outpacing China's per-capita sales. Norway sold more electric vehicles than any other nation in the world in 2018 (48.3%), and the nation anticipates selling EVs entirely by 2025 and beyond. These 6.3 million EV sales significantly increase from the 195,000 units sold in 2018. The huge increase in the variety and accessibility of EVs throughout the continent is anticipated to boost sales. By 2025, India will sell 7.4 million vehicles, up from 4.4 million in 2018. The country continues to encourage EVs to help with the country's severe pollution issues—a significant issue for the nation and its government—a significant portion of those vehicles may be EVs.
How many EVs will be sold in 2025, yet each of these distinct places witnessing EV development is unquestionably good for the EV industry and lithium as a byproduct? Well, a Frost & Sullivan research featured in the Economic Times claims that 34 million EVs will be sold worldwide in 2025. According to the analysis, EV sales will continue to expand quickly, reaching 121.2 million in 2030 and 636.7 million in 2040. The multi-billion-dollar investments made by several automakers, including Volkswagen (OTCPK: VWAGY) and General Motors (GM), look quite prudent in light of this expansion, and their products should help promote EV adoption with variety and brand loyalty.
Although the electric vehicle (EV) revolution is now being led by automobiles, it has also impacted other types of transportation. Although I've been using the word "electric vehicle" to describe automobiles and light trucks throughout this post, there are other types of vehicles that may be classified as EVs. My research into Tesla's (TSLA) battery storage business revealed that, although making up a small portion of production—less than 1% of the company's entire American vehicle output, excluding Cybertruck—Semi Tesla's would utilize 46.7% of the facility's overall battery output.
This shows that even if they only make up a tiny part of EVs, semi-trucks are still important since the lithium supply chain is rather extensive. An increase in lithium demand approximately equal to that of automobiles and light trucks would emerge from the electrification of the semi-truck sector, particularly in China. From 2018 to 2025, sales of medium to heavy trucks will increase by 33% globally (author's projection using data from Global Market Insights). Three million seven hundred forty-two thousand medium or heavy trucks were sold in the key global markets in 2017. If all markets were included, however, this number may exceed 4 million units, and growth in 2018 is very certain.
5.33 million medium to big trucks will be sold in 2025, a 33 percent increase over the estimated 4 million sales in 2018. In 2025, 3.198 million electric semi-vehicles are expected to be sold, roughly 60% of these trucks being electric.
I'll go through them a little more quickly since there are a lot of other smaller vehicles, like motorbikes, that will noticeably affect lithium demand while being quite tiny. After reaching 18.045 million in 2018, the market for electric motorcycles is expected to grow by 10.35 percent CAGR to 35.955 million in 2025. With 39,000 sales globally last year, buses are also starting to convert to battery power (author estimations from distinct Bloomberg sources [1,2]). As China, the world's biggest market gets saturated; this is predicted to decline to 20,300 sales in 2025 (author's estimates from a Bloomberg study).
There are other sources of demand for batteries and lithium besides automobiles. Businesses are developing large-scale energy storage systems like Tesla in response to rising demand. Tesla has shown in Australia that its utility battery projects are feasible and extraordinarily affordable. Peaker plants will probably become a thing of the past since it is quite foolish to keep them in operation given this efficiency. Peaker plants could not be the only item to go, however. Batteries attached to wind, solar, or hydroelectricity might eventually replace conventional coal or nuclear power facilities.
The yearly deployment of home or office energy storage systems, often used in conjunction with solar power systems, is anticipated to reach 10.6 GW in 2025. To fulfill their project requirements, utilities and their large-scale projects will need 6.6 GW of battery storage capacity in 2025 (author's estimations based on 10.6 GW for grid-connected storage and 17.2 GW overall battery storage in 2025). By adding these two battery storage requirements, we discover that in 2025, we will need 17.2 GW of batteries.
As demand for electric vehicles (EV) increased due to a worldwide race toward energy transformation, Lithium Americas Corp.'s (LAC) stock saw a successful 2021 despite growing lithium prices.
The Canadian mining company is on the verge of breaking its previous record highs in 2022 when commodities prices are soaring.
What variables influence Lithium America's share price projection, and how long can the company sustain its momentum?
most recent income
According to LAC's full-year 2021 financial results, which were disclosed on March 17, the Vancouver-based firm had a net loss of $38.48m (£29.33m) in 2021, up to $36.35m from the year before.
The business blamed Thacker Pass, still in the exploration and assessment phase, for the greater loss on increased expenses.
In 2021, LAC spent $35.96 million on exploration and evaluation costs, more than double the $17.72 million it spent on Thacker Pass in 2020. Since the Cauchar-Olaroz project is still in the planning stages, exploration costs are not associated.
LAC hasn't begun commercial manufacturing. Hence it hasn't recorded any revenue.
At Cauchar-Olaroz, stage 1 production capacity construction is around 85% complete, and commissioning is scheduled to begin in the second part of 2022. According to the company's presentation, the project's stage 1 production capacity is 40,000 tonnes per year (TPA) of lithium carbonate with battery quality.
The second stage of the extension of Cauchar-Olaroz, with a 20,000 tpa production capacity, is now under construction.
Seth Goldstein, the senior stock analyst at Morningstar, said in the 18 March note, "Despite a $100 million rise in capital expenses, we expect the project will produce value for shareholders, given our view for higher lithium prices over the next few years and its low cost of production.
The Toronto-based Arena Minerals Inc. (AN), which owns lithium brine properties in Chile and Argentina, received a 17.4% increase in LAC's strategic investment in November 2021. The business finalized the purchase of the 100%-owned Pastos Grandes lithium mine in Argentina, which is 100 km from Cauchar-Olaroz, from Toronto-based Millenial Lithium Corp. in January 2022.
With an enhanced capacity of 40,000 tpa of lithium carbonate for the first stage and the incorporation of a second phase extension to attain a desired total capacity of 80,000 tpa for Thacker Pass, the business continues to progress through the Feasibility Study.
LAC anticipates receiving the Feasibility Study's findings in the second part of 2022.
A share of the stock initially cost roughly $13 in 2021. From the middle of January until the first week of February 2021, it fluctuated between $20 and $28. The LAC stock chart below shows that after then, LAC's shares decreased to around $20 till the beginning of September 2021.
In the second week of September, the stock began to rise beyond $20, and it continued to rise until it reached its all-time high closing price of $40.96 on November 29. The shares of Lithium Americas Corp. momentarily reached a record high the next day of $41.56 before falling and ending the year at $29 per share.
Rising costs for lithium salt (lithium carbonate) and spodumene, a rock rich in lithium, had fueled a rise in the company's shares, which increased 132.03 percent over 2021.
The drive for a greener world has increased demand for batteries used in EV power production, creating a competitive market despite a rapidly expanding supply.
In China, the spot price of lithium carbonate doubled in 2021. It increased from around 53,000 yuan ($8,328.88) per tonne at the beginning of 2021 to 280,000 yuan ($44,001) by the end of the year.
According to information from Trading Economics, the price of lithium carbonate was 496,500 yuan/tonne ($78,024.32) as of April 1. As a result of surging demand and constrained supply, the price of the battery metal continued to rise until 2022, climbing by roughly 79 percent so far this year.
The economic data source said in the report that "rising energy costs as a result of Russia's invasion of Ukraine boosted the temptation to shift away from fossil fuels, contributing to the increasing demand for electric cars."
The Defense Production Act, which authorizes the US government to give additional assistance for the mining, processing, and recycling essential minerals, including lithium, nickel, cobalt, graphite, and manganese, was triggered by an executive order that President Joe Biden announced on March 31. Large-capacity batteries are made using minerals.
"As the globe moves to a sustainable energy economy, demand for such materials is expected to rise tremendously. Biden added in the statement that the United States must ensure a consistent and sustainable supply of such strategic and vital minerals to support the national defense.
The news improved attitudes toward lithium miners, especially for LAC. The firm's shares increased 4.42 percent to end at $38.49 after briefly reaching the area of $40.14, which was close to its all-time closing price in November. The price of LAC stock has increased 33.72 percent this year.
The US government's choice may improve Lithium Americas' chances of obtaining money for constructing Thacker Pass.
The business said on February 28 that a draft application for financing Thacker Pass via the Advanced Technologies Vehicle Manufacturing Loan Program had been filed to the US Department of Energy.
The initiative supports US businesses involved in producing high-tech cars and the parts that go into such vehicles.
Technically speaking, at the time of writing (April 4), the stock's short-term sentiment was optimistic, with most moving averages biased to buy. A rating of 69 on the Relative Strength Index (RSI) indicated that the market was almost overbought. A trend reversal will probably occur if the move is 70 or higher, suggesting that the stock may be overpriced.
Although the stock was trading below its R1 resistance level of $44, it was trading above its 10-day moving average of $35.
Is Lithium America a wise financial decision?
Many fundamental variables might influence the stock's prognosis. On March 23, consulting company Wood Mackenzie predicted that between 2021 and 2030, the total worldwide lithium battery capacity might increase by more than five times, reaching 5,500 gigawatt-hours (GWh).
90% of the world's battery production in 2021 was concentrated in Asia, with China as the main producer. However, the company said that by 2030, North America's cell capacity might expand tenfold while Asia-share Pacific's is anticipated to decline to 69 percent.
Europe, expected to surpass North America this year, is still ahead of the continent. By 2030, Europe is anticipated to have over 20% of the world's capacity due to its fast growth.
"Nearly 80% of the demand for lithium-ion batteries comes from the electric vehicle (EV) sector.
According to Jiayue Zheng, a consultant at Wood Mackenzie, "high oil prices are encouraging more markets to implement zero-emission transportation rules, driving increasing demand for lithium-ion batteries to reach 3,000 GWh by 2030 and making it unlikely that supply can catch up to demand until 2023.
In its note on December 20, 2021, Fitch Solutions predicted that the expansion of the world's lithium supply would pick up speed starting in 2023. However, at the same time, as major nations increase their EV penetration, demand growth is anticipated to be brisk, supporting lithium prices.
Beyond 2025, the business predicted that the global lithium market would move more firmly towards shortfalls, which would drive prices noticeably higher.
It should be noted that, among other things, your particular situation and level of risk tolerance will determine if LAC is a good investment for your portfolio. Before investing, you should research the company's performance and choose the degree of risk you are willing to take.
Is it better to purchase, sell, or keep LAC stock?
The stock was given a "buy" recommendation by analysts surveyed by several stock rating websites. LAC had an "overweight" rating from the 14 experts surveyed by MarketWatch, with seven analysts suggesting a "buy." Five analysts rated a "hold," and two gave an "overweight" rating. The analysts' average price objective for LAC stock was $37.29, with ranges of $44 to $23.75.
MarketBeat polled eleven analysts; ten gave the stock a "buy" recommendation, while one gave it a "hold" recommendation. The average consensus objective for LAC stock for the next 12 months was $39.89, with a high price target of $45.00 and a low price target of $34.00.
According to Goldstein in the letter, Morningstar maintained its fair value estimate price objective for LAC at $45 per share and said it thought the company was undervalued.
TipRanks surveyed ten Wall Street analysts, and their consensus recommendation was a "strong-buy," with an average price objective of $35.28 over the next 12 months. The price objective, however, marked a 9.40 percent decline from the closing price of $38.94 on April 1.
Although experts did not make a five-year prediction for LAC stock, the algorithm-based forecasting website WalletInvestor was optimistic about the company's long-term prospects at the time of writing (April 4).
According to WalletInvestor's stock forecasts for Lithium Americas, the stock might reach $57.25 in December 2023 and $84.85 in December 2025. LAC shares were expected to trade at $100.44 by March 2027.
Additionally positive, GovCapital forecast that the price of the LAC stock would be $83.702 by the end of December 2023 and soar to $162.414 by the end of December 2025. By the end of April 2027, a price of $224.543 was predicted for the stock.
It's vital to remember that analyst projections and price goals might be off when considering any LAC stock predictions. Forecasts shouldn't be utilized in place of your independent research. Before trading or investing, always research and remember that previous performance is no guarantee of future outcomes.
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