High petrol prices will help accelerate the transition to electric vehicles and increase demand for Australian lithium, according to Macquarie analysts, as prices for lithium concentrate continue their run into record territory.
While high costs for electric vehicles still put them beyond the reach of most Australians, Macquarie analysts noted on Monday the gap between refuelling a BMW 3 series car and a Tesla 3 was rising, with the Beamer (worth about $70,000 off the lot) costing about $100 a tank at current prices and a Tesla (about $76,000 for the long-range model) costing about $30 for a recharge.
The sticker shock at the fuel pump has prompted many to consider the switch, according to Macquarie.
“Macquarie’s Asia auto team also noted that EV shopping consideration rose 69 per cent from January when petrol prices started to rise. Shopping consideration for hybrids and fuel-efficient subcompact and compact sedans also rose by 32 per cent and 16 per cent, respectively,” Macquarie said in a client note on Monday.
That spells good news for Australian lithium concentrate producers, who – where not locked into long-term offtake contracts below market prices – are already licking their lips at rapidly rising prices for the commodity.
Lithium pricing consultant Benchmark Mineral Intelligence noted the price of Australian concentrate grading 6 per cent lithium had almost doubled this year alone, weighing in at an average $US3263 a tonne in March.
Laggardly offtake contracts are still worth about $US1800 a tonne, according to Benchmark, with top-end prices hitting $US4725 a tonne. With Benchmark signalling some contracts could be worth better than $US5000 a tonne in the current quarter, it’s clearly a pretty good time to be a lithium producer.
Amid rising talk that the current supply gap could hit unsustainable levels for battery makers in the near future, there’s a new scramble for security of supply, with Ford joining the rush to lock in offtake and signing a deal for up to 25,000 tonnes a year of lithium hydroxide from Lake Resources’ Kachi project in Argentina.
The agreement is non-binding and doesn’t come with a price – but that’s OK, because Lake is yet to get Kachi into production yet.
Lake’s announcement on Monday came amid a rush of news in the sector, with Pilbara Minerals telling shareholders it has signed off on a $US750m to $US800m budget for the construction of a lithium conversion plant with Korea’s POSCO. Pilbara Minerals will own 18 per cent of the plant when it is complete.
Ford is not the only car company or battery maker chasing down the supply chain to lock in lithium supplies, with Core Lithium having last month signed a binding offtake deal with Tesla, and Global Lithium Resources having inked a deal with China’s Suhou TA&A Ultra Clean Technology.
The big kids are also active, with Mineral Resources saying last week it plans to accelerate the return of its Wodgina lithium mine into production.
Extracted from The Australian