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Lithium, often called the “white gold” of the energy transition, has seen a dramatic price rebound after a three-year bear market.
Although lithium’s investment bull case has expanded from electric vehicle (EV) batteries to growth in energy storage systems and governments stockpiling strategic metals, potential rewards for investors still come with high volatility.
Jeremy Lin, portfolio manager with Purpose Investments Inc. in Toronto, is bullish on lithium in the short- and longer-term, and began investing in a couple of lithium stocks in March.
Higher gas prices caused by the Iran war are a short-term catalyst boosting lithium demand for EVs in Europe and Asia, while the supply-demand picture has improved, says Mr. Lin, who oversees the Purpose Global Resource Fund.
Raw lithium is extracted by pumping underground saltwater, or brines, into evaporation ponds or through hard-rock mining. After processing, it turns into a fine, white powder.
Battery-grade lithium carbonate is trading around US$21,400 per tonne after pulling back recently from a high of US$29,204 in May, according to Bloomberg data sourced from Asian Metal Inc.
Lithium hit a record high of around US$84,525 per tonne in 2022 before plunging sharply to a low of US$8,260 per tonne last August because of a massive oversupply.
Its price began rallying when China began a regulatory crackdown last August on lithium miners to stop price wars and overcapacity. It revoked expired permits and is applying stricter rules for new ones.
Chinese battery giant Contemporary Amperex Technology Co. Ltd. ( CTATF ) suspended operations at its Jianxiawo mine, which accounts for 3 per cent of global lithium production. The recent pullback in the lithium price stems from market speculation that the mine will reopen soon, but there’s been no confirmation.
Zimbabwe, Africa’s top lithium producer, then suspended exports of raw ore in February and plans to ban exports of lithium concentrates next January to force firms to build domestic processing facilities.
Mr. Lin suggests lithium could be in a more balanced market by 2027, and eventually in a deficit scenario as demand grows. His base case is for demand to grow by around 10 per cent annually over the next five years.
Power-hungry artificial intelligence data centres will increasingly need to rely on battery energy storage systems, but that’s probably a medium- to longer-term catalyst for lithium, he says.