The lithium industry has been hot since the end of 2021. The growing electric vehicle sector and the government push for electrification infrastructure provided the macroeconomic push for investor interest in lithium while sustained supply-side obstacles helped raise attention for many lithium exploration and mining stocks. A lot has happened in the lithium industry in the first 2 quarters of 2022. Here’s a look at some of the major events leading up to Q3 for the lithium sector.
Wired magazine reported this week that China’s market share for lithium-ion battery production could be as high as 80 percent, according to estimates from BloombergNEF. Six of the 10 biggest EV battery producers are based in China—one of them, CATL, makes three out of every ten EV batteries globally and that dominance extends throughout the supply chain. Chinese companies have inked supply deals with lithium-rich nations and have been the beneficiaries of major government investment in the complex web between mining and manufacturing.
Where does that leave the rest of the world? “If China decides to stick with the home market, lithium-ion batteries are going to be more expensive outside China,” says Andrew Barron, a professor of low carbon energy and the environment at Swansea University. That makes Western efforts to expand battery production capacity “more imperative than ever,” he says.
Electric car batteries contain between 30 and 60 kilos of lithium. It’s estimated that by 2034, the US market will require 500,000 metric tons of unrefined lithium per annum to meet EV demand. That’s more than the global supply in 2020.
With media attention now focused on the race for lithium supply, the investing public will likely begin paying more attention to lithium companies.
While global demand is growing for lithium, governments are looking at policies that may have unintended consequences of constraining supply. A proposed flat-rate tax on lithium produced in the Salton Sea region of California may delay deliveries of lithium to major EV manufacturers including General Motors Co (GM.N) and Stellantis NV (STLA.MI). The policy may even push some mining companies to leave the state entirely, industry executives told Reuters.
The lithium tax is structured as a flat-rate per tonne and will go into effect in January 2023.
“This tax would stifle our industry before it even begins,” Eric Spomer, CEO of EnergySource Minerals LLC said. “We’re willing to pay and contribute to the local community, but it has to be a rational tax.”
WIth taxes stifling new mining projects in California, investors should look at other, more hospitable regions for lithium mining projects.
In another move by EV manufacturers to control lithium supply, Liontown Resources Ltd (ASX: LTR) announced that it signed a lithium supply agreement with Ford Motor Co (NYSE: F). The Australian lithium miner had previously signed similar deals with Tesla (NASDAQ: TSLA) and electric vehicle (EV) battery maker LG Energy (KRX: 373220).
Liontown said on Wednesday it will supply Ford with 150,000 dry metric tonnes (DMT) of lithium spodumene concentrate each year for five years from its flagship Kathleen Valley project in Western Australia. The concentrate is a source of lithium essential for making EVs.
Promising lithium projects could see offtake agreements or acquisitions in the future as major battery producers scramble to secure lithium supply and investors should keep an eye on these possibilities when evaluating their targets.
United Lithium Corp. (CSE: ULTH) is an exploration & development company energized by the global demand for lithium. The Company targets lithium projects in politically safe jurisdictions with advanced infrastructure that allows for rapid and cost-effective exploration, development, and production opportunities.
The company is actively working on prospective locations in Sweden, the USA, Finland, and in Canada’s lithium sector where regional deposits and mining operations along with advanced infrastructure allow for rapid and cost-effective exploration, development & production opportunities.
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