RE: Big battery9 Jul 2018 03:05
From the desk of Martin Stephan, director and Chief Executive Officer:
Dear Shareholders,
Dear Friends,
I just returned from the Lithium Supply & Markets conference in Las Vegas that presented an excellent overview of the current state of the industry. Attendance at the conference was record-setting, but in a very difficult environment for explorers: in this volatile market, the Global X Lithium & Battery Tech ETF LIT is down 16% this year, after a 59% surge in 2017. The share prices of most lithium producers and explorers even plunged by more than 40%. One of the reasons was a bearish analyst report Morgan Stanley published in February - widely referenced in Las Vegas – assuming that there will be oversupply of lithium in the near future. Indeed, supply and demand projections for lithium and other battery metals such as cobalt can move materially, as they are tied to how quickly consumers will adopt electric cars or the battery industry is willing to produce battery cells.
Bullish Outlook for the Lithium Industry
My view on this is very different, the opportunity for lithium is huge. For many reasons such as costs, environmental benefits, fun of driving, etc., electric vehicles (EVs) will be successful rather sooner than later because the global car producers by now are fully committed. In China, the most important market, the market share of electrified vehicles, or New Energy Vehicles as they are referred to in the region, can reach 75% of all newly sold cars in 2025. Analysts such as Benchmark Minerals, who observe the market very closely, project demand to rise from about 220,000 tons of lithium carbonate equivalent (LCE) last year to more than 900,000 in 2025 and around 2 million by the early 2030's!
Most of the investments needed over the next five years to grow lithium production will come from downstream buyers seeking to secure supply. Chinese processors of lithium ores have been doing this aggressively already and I am convinced that the automotive sector will have to step up soon. For those that have committed to an electrified strategy, security of lithium supply is critical! In the overall context, it does not matter to them whether lithium costs $10,000 or $20,000 a tonne. Indeed, based on limited supply, lithium prices stayed high during the year and will remain high. Demand for lithium-ion (Li-ion) batteries kept growing in Q2 2018, underpinned by already strong EV sales. China retains its position as the leader in EV sales with 45% of the world's market so far this year. The analyst house Roskill predicts that 2018 could be the first year in which China alone could surpass the 1 million plug-in EVs sales milestone. Roskill sees its high-case scenario for Li-ion batteries demand matched. In addition, let's not forget that Chinese CATL went public in June reaching a US$12.3 billion valuation with expectations to achieve 50GWh battery production capacity by 2020. This is the situation on the real market!
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