Lithium producers stay bullish on EVs despite growing headwinds

Core Lithium

02/11/2023 19:21

By Ernest Scheyder and Melanie Burton
       Nov 2 (Reuters) - The world's largest lithium producers
say they remain bullish on long-term demand for the battery
material in the midst of recent price drops fueled by growing
worries that the global pace of electric vehicle adoption is
slowing.
    LG Energy Solution  373220.KS , General Motors  GM.N , Honda
 7267.T  and other auto and battery makers have trimmed EV
expansion plans in recent weeks, partly due to rising interest
rates, which in turn has stoked concerns of a supply glut for
the battery metal. 
    A basket of prices for lithium - which vary by region and by
type - tracked by Benchmark Mineral Intelligence has dropped
more than 60% this year.
    While demand for the ultralight battery metal is still
expected to rise this year from 2022 levels, investors'
expectations for white-hot industry growth were dampened by
sluggish quarterly reports from Albemarle  ALB.N , Pilbara
Minerals  PLS.AX , Livent  LTHM.N  and others.
    In Australia, the world's largest lithium-producing nation,
Pilbara Minerals is the most-shorted stock on the Australian
Stock Exchange, suggesting investors have a negative view on
lithium demand. 
    The bearish sentiment has affected more than just lithium
producers. Lithium Royalty Corp  LIRC.TO , a lithium investor,
has lost more than 37% of its value since listing in Toronto
earlier this year. The Global X Lithium & Battery Tech ETF
 LIT.P  has dropped 18% this year.
    Chris Berry, an independent lithium analyst and consultant,
advises clients to focus on a range of prices for the key
battery metal, not just spot, adding that prices today remain
far above historical trends.
    "While the spot price has cratered, I haven't seen an
evaporating of demand which would validate the trajectory of the
spot price," Berry said.    
    In calls with investors and analysts in recent days, lithium
producers said they saw the market volatility as short term,
adding that they expect electrification to keep growing.
    "We see what's happening now as road bumps, but certainly
not a determinant for the long-term growth we have," Eric
Norris, head of Albemarle's Energy Storage division, told
investors on Thursday after the company cut its annual forecast
and reported disappointing quarterly results. 
    Livent  LTHM.N , which supplies BMW  BMWG.DE  and Tesla
 TSLA.O  said it continues to expect strong lithium sales
despite its own weak results. "We see (lithium) supply
continuing to be the constraint on demand," said Livent CEO Paul
Graves.
    Pilbara last week flagged a "softening market backdrop" and
ruled out share buybacks or special dividends for shareholders. 
 Still, executives said that decision was born from a desire to
be cautious for the time being.
    "Demand is absolutely there," said Pilbara CEO Dale
Henderson. "It's just a case of moderating pricing. It's still a
very healthy market."
    Mineral Resources  MIN.AX , which operates lithium mines
with Albemarle and Jiangxi Ganfeng Lithium, described the
market's current state as a "rebalancing" of supply chains. 
    And IGO  IGO.AX , which holds a stake in a joint venture
that controls Greenbushes, the world's largest lithium mine,
warned of ongoing market volatility earlier this week, but added
it believed the industry's troubles were only "near term".

 (Reporting by Ernest Scheyder in Houston and Melanie Burton in
Melbourne; writing by Ernest Scheyder; Editing by Veronica Brown
and David Evans)
 ((ernest.scheyder@thomsonreuters.com; Twitter: @ErnestScheyder;
+1-713-210-8512; Reuters Messaging:
ernest.scheyder.thomsonreuters.com@reuters.net))