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The gap between lithium prices and lithium stocks


On this monetary morning … the transition to energy is a lifelong opportunity … renewable energy is growing much faster than expected … fears of inflation are sending out markets … and much more …

Well, here it is. The Reserve Bank of Australia has raised interest rates for the first time since 2010.

And it looks like Gov. Philip Lowe says that’s not the caseunreasonableExpect the cash rate to rise to 2.5% over time.

Although I still think that central banks will delay the growth of interest rates (now rates are 0.35% and inflation is 5.1%), it is clear that sentiment is changing.

Only a few months ago, central banks said they would not raise rates until 2024 or that inflation would “transitional‘.

The U.S. Federal Reserve is also expected to raise rates by half a percentage point this week, and the European Central Bank is already talking about raising rates to … um … zero.

Disruptions in supply chains, government incentives and labor shortages have all led to rising inflation.

And, of course, energy prices were also a big factor. Energy prices may rise further as the EU seeks to impose oil sanctions on Russia.

But as inflation rises, one of the best places to stay, in my opinion, are goods, and in particular, goods needed for the transition to energy.

Energy transition is a possibility of a lifetime

Renewables are growing fast – much faster than expected.

In 2021, the share of clean energy in global electricity reached 37.9%, and solar and wind energy accounted for just over 10% of the world share.

I mean, just 12 years ago wind and solar energy accounted for only 1.7% of world electricity production.

Costs are falling as technology improves. In fact, the International Energy Agency crowned the solar system as “the cheapest electricity in history‘in 2020.

But also, the more renewable energy we install, the cheaper it becomes.

Electric cars are also growing rapidly as batteries become cheaper and government policy lags behind EVs.

In 2020, when the overall car market fell during the pandemic, EV sales rose to about three million from 2.2 million the previous year.

And in 2021, sales of electric vehicles more than doubled to 6.6 million.

Sure, EVs still make up a small amount of total car sales, but their share of the global sales market has grown from just 1.4% to almost 9% in the last five years.

It is no longer a question of whether the transfer of energy will take place, but of how soon it will take place.

And a lot of money will come into this area.

BloombergNEF estimates that the global transition will require about $ 173 trillion in investment over the next 30 years. Yes, you heard right, a trillion of T.

Solar panels, wind turbines, electric cars … all of this will need to increase the amount of raw materials for the transition.

The International Energy Agency estimates that by 2040 the demand for cobalt, graphite and nickel will grow 20-25 times, and the demand for lithium may grow even more, more than 40 times over the same period of time.

And if we talk about lithium …

Fears of inflation are sending ripples in the markets

And the inflation-driven sell-off included lithium stocks.

In particular, there has been concern about the demand for lithium from China as the number of COVID continues to grow.

So interestingly, since the beginning of the year, lithium carbonate prices have risen 126%, according to Benchmark Minerals, but lithium stocks are falling.

For example, on Global X Lithium & Battery Tech ETF decreased by 21% since the beginning of the year.

Major lithium mines, such as Albemarle Corporation and Livent Corp., also fell nearly 17% and 14% since the beginning of the year, respectively.

Liontown Resources[ASX:LTR] The stock price sparked no interest on Monday after the company announced a five-year deal with LG Energy Solutions to supply lithium memory.

And even Pilbara Minerals has fallen 25% since the beginning of the year, even though they said the average price they received for a spodum in the March quarter rose to $ 2,650 per dry metric tonne (dmt) from 1,750 to 1,800 solid tonnes in December quarter.

Don’t get me wrong. These are not recommendations, but simple observations.

Of course, choosing the right stocks will be crucial, but the fact that lithium is still the key to the energy transition and still going to crisis is no less real today than it was a few months ago.

Until next week,

Selva Freigeda,
For Morning money

Selva is also the editor of ois An investor in new energy, a newsletter looking for opportunities in the energy transition. To get information on how to subscribe, Click here.


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