A swift recovery in electric vehicle (EV) demand has intensified the lithium market, leading to a remarkable surge in prices of the essential battery material by nearly 50 percent. According to Reg Spencer, a lithium expert at Canaccord Genuity, this unexpected rebound is driven by strong demand across China, Europe, and other regions, with the broker acknowledging its previous forecasts as being “too conservative.”
The resurgence in lithium prices follows a decline in new supply entering the market. This slowdown is attributed to the closure of several mines and project delays prompted by falling prices. Since June, prices for spodumene, a primary form of lithium mined in Australia, have increased from $575 per tonne to approximately $850 per tonne, as reported by S&P Global Platts. Consequently, lithium stocks have also benefited; for instance, IGO has gained 37 percent and Liontown Resources nearly 60 percent.
In his latest note to clients, Spencer indicated a shift in Canaccord’s outlook, stating, “We have pivoted from our conservative stance on the [lithium] sector. With a more positive outlook, we think investors should reassess sector exposure.” He emphasized that the down cycle in lithium markets appears to have passed, positioning lithium equities for potential gains.
The current upswing in EV sales is significant, with figures showing an increase of 30 percent year-over-year for 2024. This growth is particularly notable in China, where competition among domestic manufacturers has driven down prices by 32 percent. In Europe, EV sales have surged by 26 percent, partially compensating for stagnant growth in North America.
Spencer remarked, “Demand is much stronger than we previously expected.” The positive outlook for EV sales coincides with indications that lithium production is being curtailed, especially in China, where the government is addressing overcapacity issues in commodity markets. Regulatory actions have impacted production significantly; for example, Zangge Mining recently halted operations at its Qarhan project after discovering issues with its mining licence. Additionally, eight mines in Jiangxi province have been instructed to provide “reserve verification reports” due to discrepancies in their licence approvals, as outlined by Morgan Stanley. Another major producer in Jiangxi has temporarily suspended spot market sales for three months.
As a result of these dynamics, Canaccord now anticipates a smaller surplus in lithium markets for this year and the next. The broker projects a deficit of 12,000 tonnes by 2027, which could elevate spodumene prices to $1,100 per tonne during that timeframe.
Canaccord has adjusted its ratings for various lithium companies, issuing a “buy” rating for Pilbara Minerals and a “hold” recommendation for both IGO and Liontown Resources. Additionally, the broker upgraded Core Lithium to a “speculative buy,” aligning it with other listed lithium explorers such as Vulcan Energy, Patriot Battery Metals, Ioneer, Wildcat Resources, and Galan Lithium, all receiving similar recommendations.
The lithium market is experiencing a notable transformation, driven by increasing demand for electric vehicles and strategic adjustments in production capabilities. As the landscape evolves, investors and stakeholders are likely to keep a close watch on these developments.
