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Msg  1523 of 1583  at  9/24/2020 2:31:19 PM  by

rightjake


Lithium demand - post battery day guessing

 There are two polar opposite takes on lithium demand after the Tesla battery show. 
 
As Rodney Hooper pointed out Tesla's battery production target for 2022 of 150-175 GWH of battery cells translates to 120-140T tonnes of lithium carbonate and hydroxide.  That demand alone would exceed all battery quality production this year.  
 
Morgan Stanley on the other hand  said this:
 

"Tesla announced improvements to battery technologies that are likely to support EV sales in the longer term, but also to reduce lithium usage and production costs. They also announced their own lithium mine with a new, lower-cost and more sustainable process," Stanley's Javier Martinex de Olcoz Cerdan says, and "lithium stocks [likely] to react negatively."

Before the event, investors had expressed optimism about the potential for cheaper batteries, expected to translate into higher electric vehicle penetration and lithium demand, but "the excitement will be replaced by concerns, as the new technologies announced can reduce lithium usage and production costs," Stanley writes, adding that lithium stocks are driven by lithium price expectations and likely will underperform.

 I'm quite confident that Rodney Hooper and Joe Lowry are right, that lithium demand and prices will rise sharply in the next 1-3 years, especially for battery quality, with market anticipating the rise by a year or so. 
 
Contrary to Morgan Stanley's comment there was nothing in Tesla's aspirational plans suggesting lower lithium use. And the assumption about lower production costs is based on Tesla's pie in the sky  announcement that they will do their own lithium mining and processing. Tesla had no timetable for production of their own lithium, just a vague promise of 33% cost reduction in lithium produced from sources in the US.


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