As the chart below shows, the demand, real and speculative, for lithium continues to drive prices materially higher. As new EV models prepare to launch this year and new battery facilities come online there is an inevitable supply chain impact to build inventory, whether it is the battery facilities building an inventory of lithium and other components or the automakers building an inventory of batteries. This will inflate lithium and other critical material demand relative to the vehicle output and this may be driving some of the demand panic for lithium. However, this dynamic is unlikely to be transitory in the near term, as there is a long wave of new EV capacity coming online, all of which will drive some incremental working capital build. We still believe that supply growth for lithium is very high and that the market could flip from famine to feast and back again quite quickly and frequently over the next few years although maybe not in 2022. Also see today's daily report and last week's ESG and Climate report for more on this topic.
Source: Bloomberg, C-MACC Analysis, January 2022