If you think you missed your opportunity to profit from the lithium bull market, don’t worry.
Wall Street’s major investment banks remain bullish on lithium, and we should pay attention to their outlooks.
No wonder they are excited. Lithium has been one of the best-performing metals of the last few years.
Its price went up 442.8% in 2021, then gained 72.5% last year. This surge delivered massive gains to the companies involved in the lithium sector as their sales skyrocketed.
Albemarle, one of the world’s largest lithium companies, saw its revenue soar 69% over the 12-month period that ended on September 30, 2022, compared to the same period one year ago.
Looking at these impressive gains, some investors expect that this multi-year bull run is about to end. They think that the current price of lithium isn’t sustainable.
But with demand still strong and the supply not keeping up pace with it, the price of lithium might stay higher for longer.
After such a stellar run, most investors, both retail and institutional, expected a slowdown. But recent data on the state of the lithium market balance suggest that it may not be coming.
Preliminary data compiled by Bloomberg shows a severe lithium deficit for 2022. This market imbalance pushed the price of the primary battery metal higher in the first place.
Now, looking forward to 2025, JPMorgan, Morgan Stanley, and Bank of America expect the lithium sector to remain in deficit. Their forecasts vary, but no one is betting on a lithium crash.
This outlook by the major investment banks leads us to the conclusion that high lithium prices may be the new normal. Wall Street has finally realized that lithium is here to stay.
At the current prices, lithium producers have been posting record profits. Albemarle, for example, earned almost $1.6 billion in the 12-month period that ended in September 2022. It was seven times higher than what it had made one year before.
If the major banks are correct, we still have several more years to profit from this trend.
So don’t beat yourself up for missing out on the initial lithium rally. You can, in our view, still take advantage of the shortage of this battery metal.
Billions Keep Flowing Into the Global Lithium Supply Chain
EV and battery makers across the world are fighting to secure enough lithium supply.
In China, the world’s leading battery producer CATL announced a 6.44-billion-yuan ($950 million) bet to secure exploration rights for a lithium project.
CATL desperately needs to ensure that it has an ample supply of this core battery metal. Otherwise, sales and market position are at risk.
In the U.S., the White House announced a $700 million funding package for a domestic lithium project. Australian miner Ioneer Ltd. is getting funding for its Rhyolite Ridge lithium project in Nevada.
That’s why governments and businesses everywhere in the world are rushing to secure a reliable supply of critical minerals.
We’re still in the early stages of this race. This means it’s the best time to start establishing your positions to profit from this multi-decade megatrend.
Thank you for your loyal readership,
The Financial Star team