Tighter Lithium Supply and Bigger Price Jump Makes Lithium a Great Investment in 2022

lithium supply
Published on: March 3, 2022
Author: NAI500

As EV sales soar, a lithium supply shortage is creating intense price pressure for the raw material. Miners are scrambling to find ways to ramp up production at existing facilities while they search for new lithium supply sources; however, there appears to be little relief for limited supply and surging lithium prices in the near term. 

Lithium Demand Seen Reaching 3 Million mt by 2030

Demand for lithium – essential to the production of lithium batteries – has been skyrocketing. After reaching record-high prices in 2021, lithium production has failed to keep up with burgeoning demand. Moving forward into 2022, producers will need to ramp up production to shrink the growing lithium supply deficit. 

Recently US-based specialty chemical manufacturing company Albemarle raised its lithium market forecast by 30%. The company predicts demand will top 1.5 million metric tonnes by 2025 and 3 million mt by 2030, attributing the bulk of that increase to soaring demand for electric vehicles that is unlikely to slow anytime soon. 

“When you look at last year’s EV growth rate of nearly 50% and the auto industry’s ambitions for a rapid transition to EVs, it’s easy to see why demand expectations are so bullish,” commented Albemarle CEO Kent Masters. “However, meeting this demand will be a challenge.”

Lithium Prices Rise on Tight Supply

Lithium prices continue to climb on deepening lithium supply shortages, according to analysts at Fastmarkets. 

The spot price for battery-grade lithium carbonate has gained more than 65% YTD and over 11% in the past week alone, commanding 479,500 yuan per tonne during trading Monday, up from 430,000 yuan per tonne just a week earlier. 

“Chinese market participants were surprised that China’s lithium prices continued to rise rapidly after the recent Lunar New Year holidays, even though lithium producers in the country have resumed production this week,” Fastmarkets said.

“Battery-grade lithium carbonate units are so scarce in the spot market that price is not the primary concern for downstream consumers,” an unnamed Chinese lithium producer source told Fastmarkets. “They are looking everywhere for available units. But there are few sellers who still have any spot supply.” 

There Is Simply Not Enough to Meet Demand

The current lithium supply crunch may be reminiscent for some of the 2016-2017 lithium price boom, which was followed shortly after by a sharp price decline that persisted until late 2021. 

Evidence suggests, however, that this time is different and what we are witnessing right now is the real deal. 

Six years ago, many producers failed to recognize that lithium demand was primarily propelled by subsidy-driven EV demand coming from China. Production ramped up quickly and soon overshot waning demand. The resulting lithium supply surplus caused prices to plummet; producers abandoned new mines and deferred expansion projects while stockpiling excess material. Many exploration companies transitioned to other minerals. 

However, six years ago, EVs were still in their infancy; today, the push for electrification has reached a fever pitch. Global sales of EVs have jumped 94% year-on-year, according to data from BloombergNEF, with demand expected to remain strong throughout 2022. 

But once again, lithium supply shortages are leaving producers ill-prepared to meet surging demand, fueling the flames of the current lithium price rally. 

Will United Lithium Benefit From This Trend in 2022?

This is why mining companies like United Lithium can be a great investment in 2022.

United Lithium Corp. (CSE: ULTH; OTC: ULTHF; FWB: 0UL) is a mineral exploration and development company leading the charge towards more sustainable energy generation powered by lithium-ion batteries. 

Currently, the company has projects located in several favorable mining districts, including Sweden, Finland, and Canada. Targets have been selected in politically safe regions with the infrastructure needed to ensure rapid, cost-effective exploration and development and production opportunities. 

Investment Highlights

  • Projects in Sweden and Finland have yielded evidence of extensive lithium mineralization.
  • Claim areas offer ready access to deep water ports and proximity to highways and major infrastructure
  • European battery factories are numerous and growing, with a ‘gigafactory’ under construction nearby with easy access.
  • Europe is racing ahead with EV vehicles. Volvo, VW, Mercedes and others investing heavily in regional manufacturing
  • The Canadian Barbara Lake Lithium Property is part of the prolific Georgia Lake lithium pegmatite fields

Disclaimer: The company described in this article is a customer of NAI Interactive Ltd. This material is for informational purposes only and is not intended as a recommendation or offer or solicitation for the purchase or sale of any securities or financial instruments, or for transactions involving any financial instrument or trading strategy.

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