Lithium Forecast 2021: Execs Optimistic on Long-term EV Trend

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In a year where all eyes were set on the impact of the coronavirus pandemic, interest in battery metals, including lithium, seemed to increase.

Governments continued to push green agendas, with electric vehicles (EVs) at the center of every plan.

But what will happen to lithium next year? To find out, the Investing News Network (INN) asked companies what they saw in 2020 and what to expect for lithium miners in 2021.

Lithium trends 2020: Pandemic fuels challenges

The past few years have seen lithium miners take steps to survive challenging market conditions by scaling back production and cutting costs.

But at the end of 2019, the industry was experiencing a very positive uplift and a resurgence in the equity markets, Carlos Vicens of Neo Lithium (TSXV:NLC,OTCQX:NTTHF) told INN.

“We expected that the lithium price would recover by the end of 2020 and the equity markets would follow shortly thereafter,” he said.

Steve Promnitz, managing director of Lake Resources (ASX:LKE), was also expecting lithium prices to stabilize and trend upwards, a move that didn’t happen until later in the year.

When looking at the most challenging aspects of the market, COVID-19 was at the top of the list.

The first three months of the year brought a slowdown in lithium demand from China, the sector’s biggest player, and brought a steep decline in EV production and sales as automakers took preventive measures and paused their ambitious electrification plans.

As mentioned, producers had already initiated a supply response to this challenging environment prior to the outbreak, but COVID-19 also brought temporary suspensions and revisions of expansion plans.

The big focus of lithium producers and developers in the first quarter was on slowing down the spread of the virus, as well as on trying to maintain healthy balance sheets to survive this uncertain season.

For lithium juniors specifically, Promnitz told INN that a difficulty throughout 2020 was getting people with funds to focus on closing transactions or financings during the pandemic disruption.

The second half of the year, however, saw increased demand for EVs in Europe and a recovery in China. Despite the downward price trend for lithium, interest in the battery metal surged.

Tesla’s (NASDAQ:TSLA) Battery Day in Q3 put all eyes on lithium mining, with the electric car maker signing a supply deal with Piedmont Lithium (ASX:PLL,NASDAQ:PLL) days after the event. Piedmont is developing its spodumene lithium project in North Carolina.

The deal, alongside other announcements made by the US carmaker, put the buildout of a North American lithium-ion supply chain in focus, and put the spotlight on the increasing need for quality raw materials and processing to meet the demand expected from the EV space.

The move to self-sufficiency in North America will take time, and in the meantime car and battery companies, which are trying to move away from being fully dependent on China, will need to continue to rely on raw materials from regions such as Australia and South America.

In Australia, lithium miners have been struggling to keep up with the tough environment, with the most significant news coming in Q4, when Pilbara Minerals (ASX:PLS), which is developing the Pilgangoora lithium-tantalum project, acquired neighboring spodumene producer Altura Mining for $175 million, pointing to further consolidation in the sector. Altura had entered receivership at the end of October.

Despite the casualties seen in the Australian lithium space in recent years, including Alita Resources delisting from the ASX, and projects going into care and maintenance due to challenging conditions, such as Albemarle and Mineral Resources’ Wodgina, Australia’s potential as a key player in the supply chain remains, as the expected demand for lithium and other critical metals could create opportunities for the country.

In 2020, the uncertainty brought and fueled by COVID-19 didn’t stop the EV and energy revolutions from gathering interest from investors. In fact, despite lower lithium prices, many lithium stocks jumped on the back of expected future EV and energy storage demand.

Top lithium producers, from China’s Ganfeng (OTC Pink:GNENF,SZSE:002460) to US-listed Albemarle (NYSE:ALB), SQM (NYSE:SQM) and Livent (NYSE:LTHM), ended the year in the green; even debt-troubled Tianqi Lithium (SZSE:002466) posted an increase of more than 20 percent in 2020.

Juniors also surged, with many TSX- and TSXV-listed companies seeing share prices rises — and ASX-listed companies were not left behind.

Lithium forecast 2021: Execs optimistic

As the new year kicks off, many still believe in the long-term future of lithium, as governments continue to push for more EVs on the road.

Lithium producers remain optimistic, with Chile’s SQM expecting the market to expand in the long term by 20 percent a year, reaching 800,000 to 1 million metric tons by 2025.

SQM, which saw its sales volume increase steadily in 2020 despite COVID-19, has begun the process to raise US$1.1 billion to help finance its previously announced US$1.9 billion four year investment plan.

The company aims to more than double its capacity to produce lithium carbonate in Chile to 180,000 tonnes annually from 70,000 tonnes. SQM has brine operations in the Salar de Atacama in Chile and is developing the Mount Holland spodumene project in Australia in a joint venture with Wesfarmers (ASX:WES,OTC Pink:WFAFF).

In 2021, rival Albemarle is expecting its Kemerton and La Negra expansion projects to be commissioned, with sales volume beginning in 2022. The US-listed company is expecting 2021 fiscal year pricing to be down slightly primarily due to lower average realized pricing for carbonate and technical-grade products.

Albemarle operates two lithium brine resources — one is located in the Salar de Atacama in Chile, and the other is in Nevada’s Clayton Valley near Silver Peak. The company also holds a 49 percent share in the Greenbushes spodumene mine in Australia, operated by Talison Lithium.

Despite disruptions to supply chains globally due to COVID-19, EV sales are now tracking higher year-over-year, and top producer Livent continues to expect significant EV demand growth.

“We continue to see evidence that demand for lithium compounds will accelerate in 2021 and beyond, with growing support for electrification from OEMs, governments and consumers, despite significant disruptions in 2020,” said Paul Graves, president and CEO of Livent, in a press release.

Livent operates its lithium business in the Salar del Hombre Muerto in Argentina.

Speaking with INN about what’s ahead for the space, Lake Resources’ Promnitz said he is expecting a better lithium market in 2021.

“I expect a better market in lithium because the EU and UK have legislated to change cars from internal combustion engine (vehicles) to electric, and this, together with a (Joe) Biden administration (in the US), will drive the need and price for battery materials,” he said.

Lake Resources is developing its flagship Kachi project in Catamarca, Argentina, using direct extraction technology for production of sustainable, high-purity lithium.

For 2021, Neo Lithium’s Vicens is also expecting a better market.

“All OEMs and battery manufacturers have provided guidance of significant lithium (and other battery materials) usage,” he explained to INN. “Even with the COVID-19 pandemic it has been a stellar year for lithium equities.” In terms of prices, Vicens is expecting a recovery in 2021, which should bring even more support for equity valuations.

Neo Lithium is developing the Tres Quebradas project in Catamarca, Argentina, and recently closed a strategic investment with CATL (SZSE:300750), a leading Chinese EV battery company.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Piedmont Lithium, Neo Lithium and Lake Resources are clients of the Investing News Network. This article is not paid-for content.

The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.