Lithium Prices Show Signs of Stabilizing After Significant Rally

Patriot Battery Metals has likely bottomed along with lithium prices, which had been averaging around $10,000 per tonne from 2016 to 2021. However, with the rise of electric vehicles, the lithium carbonate price surged from $6,000 per tonne to a high of $70,000 per tonne in 2021.

Lithium prices, which had been averaging around $10,000 per tonne from 2016 to 2021, experienced a dramatic surge to a high of $70,000 per tonne in 2021, driven by the rapid growth of the electric vehicle (EV) sector. This significant increase was fueled by a combination of surging demand, constrained supply, and market dynamics [2].

The surge in lithium prices was a result of a number of factors. Firstly, the global EV market doubled from 3.3 million units in 2020 to 6.6 million in 2021, and added another 55% to reach 10.5 million in 2022. This rapid rise in EV sales significantly increased demand for lithium-ion batteries, which require substantial amounts of lithium (about 9kg per EV battery) [2]. Additionally, limited supply growth due to the time-intensive nature of bringing new mines online and supply chain constraints, such as labor shortages and plant maintenance issues, exacerbated the supply deficit [2].

Despite the sharp price decline in 2023, there are signs that lithium prices and the sector as a whole may be bottoming out. In the past month, sector leader Pilbara Minerals (PLS) has bounced 31% higher, while fellow producer Liontown (LTR) has notched up a 26% gain. Among the developers, Patriot (PMT) has gained 31% and Wildcat (WC8) has put on 35% [1].

Patriot Battery Metals, led by former Pilbara Minerals boss Ken Brinsden, has been one of the key beneficiaries of the recent recovery. Brinsden navigated Pilbara through a previous cyclical low to get first spodumene concentrates from its Pilgangoora project loaded on to a ship in September 2018. He now serves as the president and CEO of Patriot, which owns the biggest and highest grade hard-rock lithium deposit in the Americas, the Shaakichiuwaanaan project [1].

The recovery in lithium prices and the sector-wide gains suggest that the market is warming to the notion that the lithium market has bottomed. However, no one expects there will be a sharp recovery in underpinning spodumene/lithium prices. Inventories are still high, and China continues to sponsor production from low-grade operations [1].

The future of lithium prices will be influenced by the ongoing demand growth from the EV sector and the emerging battery energy storage systems (BESS) sector. Additionally, the army of humanoid robots that investment banks and Elon Musk expect will arrive in factories and on our doorsteps sooner than most think could further boost demand [1].

In conclusion, while the lithium market has been volatile, recent gains suggest that the sector is stabilizing. Patriot Battery Metals, with its strategic Shaakichiuwaanaan project, is well-positioned to benefit from the recovery in lithium prices. However, investors should remain cautious and monitor the market closely for any signs of further price movements.

References:
[1] https://www.livewiremarkets.com/wires/investors-betting-lithium-has-bottomed-but-recovery-expected-to-be-slow
[2] https://seekingalpha.com/article/4800045-patriot-battery-metals-has-likely-bottomed-along-with-lithium-prices