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KeyBanc analysts explained, “We expect demand for lithium in China to improve after a downturn that started in November 2022. Our recent checks from the Li industry in China indicate that inventories at the battery cell/EV OEM level are declining, and could bottom out in the coming months.”
They think lithium purchase orders from large buyers could resume shortly.
“Spot Li market in China already turned from long to tight again, after bouncing off a cost floor; spot Li carbonate is up $3,977/ton or 17% from late April,” continued the analysts, adding “EV sales in China have been consistently improving from late-2022 weakness.”
KeyBanc noted that recent auto OEM EV price cuts will stimulate lithium demand, and demand outside of EVs continues to be strong.
“Overall, we view the supply/demand outlook for lithium as balanced over the next 12 months, which should at least support prices at current levels, as well as EBITDA expansion, given ALB’s 17-19% LT volumes CAGR,” concluded the analysts. “We see more limited downside risks to consensus after recent guidance cut, and management’s mark-to-market assumption of ~$40/kg Li price in 2H23. We also see upside potential to consensus in ’24 as ALB’s lagging spodumene costs catch up to lower market prices.”
