Pilbara Minerals MD on why lithium prices will remain strong

Published 05-APR-2022 11:18 A.M.

2 min read

Macro: Lithium

We recently came across this presentation by Ken Brinsden the Managing Director of ASX listed Pilbara Minerals ($11 billion capped), one of Australia’s largest lithium exporters operating out of the Pilbara, WA.

The presentation had a lot of great insights into the future of the lithium market and the market dynamics at play right now. But one point that Ken Brinsden made really stood out to us.

When asked if the current lithium price could stay where it is, Ken replied that investment in midstream/downstream (manufacturing/battery industry) was far ahead of upstream (mining industry).

We have seen this with the major OEM’s including Tesla, VW, Daimler all making large capital investments in developing large scale battery manufacturing facilities, and in the case of the legacy automakers, making large commitments to electrifying their car fleets.

Ken highlighted that it takes 1-2 years to build out these facilities whereas it takes ~7 years to bring a new resources discovery into the production stage.

Ken also mentioned that he expects prices to remain high in the near future because the market will need to keep miners incentivised to bring new supply onto the market.

With lithium carbonate prices trading at ~US$78,000/t, up from ~US$13,000/t this time last year, Ken’s comments clearly highlight the structural supply/demand issues behind this move.

We hold a number of lithium exposures in our portfolio, and have been invested in these from way back when the lithium prices were below US$10,000/t.

Click on the company names below to read our 2022 Investment Memos to see why we continue to hold them in our portfolio and what we want to see achieved in 2022.

Vulcan Energy Resources (ASX:VUL) - Next Investors portfolio