Have investors had the wool pulled over their eyes? We would no longer completely rule this out. Let's start with the issue of margins: the sale of lithium is actually a highly profitable business... even at current prices? The production costs for a well-positioned company should be around USD 4,700 per tonne. At peak prices at the end of 2022 at over USD 80,000/tonne, a "bombastic" business. However, with production increases and more and more mines, there was constant pressure on margins. The question is whether the business is still profitable at the current lithium price of around USD 13,300/tonne. We think so, but profits are of course collapsing and there is probably not much room for improvement. Estimates of how much lithium is now needed for increasing demand for batteries - 74% of lithium is used for this - also seem to deviate from reality. For example, the new LFP batteries (lithium iron phosphate), which are increasingly becoming the standard in the lower price segment, require less lithium than previous lithium-ion batteries. The energy density will continue to increase in favor of lithium. But this is by no means the tip of the iceberg, as other battery types are being developed, including those that do without lithium altogether; graphene and solid-state batteries are at the top of the list in this respect. However, as is usually the case, opinions differ widely: Nobel Prize-winning chemist Michal Stanley Wittingham believes that lithium will remain indispensable for the production of economical, long-lasting batteries for at least another ten years. Most scientists clearly agree with this thesis, but nevertheless see alternatives in a few years' time, such as solid-state batteries, which would replace electrolyte solutions. Sodium, magnesium, calcium or aluminum are also said to be alternative charge carriers. We believe that this is more a case of wishful thinking or hope being the "father of thought".
Lithium is and remains the lightest metal on earth and has the lowest density of the elements that are solid under standard conditions. A qualitatively better alternative to rechargeable lithium-ion batteries is therefore rather unlikely. Another question that remains is the environmental friendliness of lithium extraction: This is definitely controversial, not least because of the high water consumption. How better the alternatives would fare here, we have to leave open for the moment. The recycling issues are also rather unclear. In terms of consumption, experts estimate that around 1.6 million tons of batteries are needed each year. However, the economically viable reserves are estimated at 14 million tons and the total proven resources at 62 million tons. Despite increasing extraction, lithium is therefore not expected to become scarce for the time being... Turnaround?
And the market seems to have noticed this a few months ago and lithium shares are "out of fashion". Ultimate question: "When will the tide turn again?"
LITHIUM AMERICAS is listed on the NYSE in New York under the symbol LAC, the security number is 39,040,806, last price approx. USD 3.85.
