William John Market Report 22-10-21
William John takes a look at the emergence of Lithium as one of the world’s most important resources.
William John, Lithium, Mining, Commodities, Markets, Electric Vehicles, Net Zero, Climate Change, Carbon

William John Market Report 22-10-21

William John Market Report 22-10-21

Category: Reports

Lithium will be known to most of the world as “Li” on the periodic table if you were taught chemistry at school – until now. Lithium is rapidly becoming one of the world’s most essential resources; being the main material used for manufacturing car batteries and for industrial scale electricity storage. 

China accounts for 80% of the world’s battery cell manufacturing capacity, making it the world’s largest consumer of Lithium (approximately 40% of the world’s supply) according to the Financial Times. As sales for electric vehicles continue to build momentum in the coming years in line with shifting consumer preferences, impending government legislation (particularly in Western markets) and overall product quality increasing, the demand for Lithium Carbonate is skyrocketing – contributing to an aggressive increase in its price over the past year:

Source: William John Analytics, Investing.com

With Chile, Argentina and Australia holding the largest reserves of Lithium, this has sparked a series of Chinese-led acquisitions for mines located in these regions. For example, Zijin Mining, a Chinese company that mines copper and gold, recently completed an $768 million all-cash deal for Neo Lithium, representing an 18% premium on its trading share price. However, the acquisition puts Zijin in control of the some of the largest Lithium mines in the world and without question it will pay literal dividends in the decades to come. Looking at the performance of Lithium mining stocks as an industry demonstrates that the markets agree, with Albemarle, SQM and Neo Lithium experiencing significant gains throughout 2021. 

The current issue facing lithium extraction in particular is that it is thinly layered across rocks and brines or salt plains, making it difficult to extract in large quantities. This is contributing to a rise in “short-term” prices, which is attracting lateral M&A integration from large miners internationally into lithium extraction, noting the Zijin deal as an example. The view is that the more large manufacturers and extractors of lithium and lithium derived products enter the market, the more competition will innovate new types of technology to be used for lithium extraction, leading to a surge in mining capacity and a fall in lithium prices over the long term. 

China currently dominates the lithium markets and electric vehicle market. However, European countries are attempting to compete. Recently, in a UN Heritage town called Cáceres in Spain, there has been widespread opposition to the Australian based Infinity Lithium’s proposal to develop one of Europe’s largest lithium mines just outside the town. Investment in Europe’s lithium mines could provide a competitive advantage to combat China – given China’s not-so-friendly relations with major European nations, especially concerning trade, likely to limit Chinese involvement in European lithium projects.

Nevertheless, as it stands, the world’s largest polluter ironically holds the keys to the future of net-zero electricity storage and travel – controlling the most important primary and secondary markets for low-carbon electricity usage in the world: lithium carbonate extraction, the production of lithium-ion batteries and the production of electric vehicles. 

Any opinions expressed in these documents are those of William John and are provided for information only. E&OE.