The long-suffering lithium sector is enjoying a rare boom after mining giant Rio Tinto Group (NYSE:RIO) announced an all-cash $6.7 billion deal for Arcadium Lithium Plc (NYSE:ALTM), good for a hefty 90% premium to the Oct. 4 closing price. Both company boards unanimously approved the merger, with the deal expected to close mid-2025. Arcadium Lithium was formed in January 2024 following the US$10.6 billion merger of equals between U.S.-based Livent and Australia’s Alkem. 

Arcadium Lithium’s shares have nearly doubled since the merger was announced; Albemarle Corp. (NYSE:ALB), the world’s largest lithium producer, gained 9.4%, SQM (NYSE: SQM) went up 7.9%%, Standard Lithium (TSXV: SLI, NYSE: SLI) gained 39.2% while Lithium Americas Corp. (TSX: LAC, NYSE:LAC) was up 6.7%.

The acquisition is seen as a major win for Rio Tinto, with the company having struggled to get traction in the lithium market after its Jadar project in Serbia ran into local opposition. This means that Rio Tinto now owns the world’s third-largest lithium reserves, behind only Corporacion Minera de Bolivia, also known as COMIBOL, and SQM.

But it’s Albemarle that the markets will be looking at much more closely now. Its strong Q2 performance was impressive, given the extremely fragile nature of the lithium market. Despite these conditions, ALB managed to increase lithium sales volumes and the outlook has been highly optimistic, with ALB forecasting $15-per-kilogram prices. Under pressure from falling lithium prices, a weakening EV market and Chinese oversupply, ALB has taken a beating, shedding 45% year-to-date. That makes this stock a potential buy-on-the-dip opportunity, particularly in the wake of the Rio Tinto developments.

We could be in the middle of a lithium turning point here, and if that is the case, Albemarle has its ducks lined up in a neat row.

Turning Point

That said, the broad-based lithium rally kicked in well before the Rio Tinto merger. The Global X Lithium & Battery Tech ETF (NYSEARCA:LIT) has jumped nearly 30% after sinking to a 3-year low exactly 30 days ago.

The rebound coincides with growing predictions that lithium prices could have bottomed out. A month ago, Citi analysts raised their near-term price target for lithium carbonate to $14K/metric ton and for lithium hydroxide to $14.2K/ton, from a prior forecast of $10K/ton for both products, predicting a near-term rally in lithium prices as investors cover their short positions. However, Citi  added that over the next 6-12 months "does not expect the rally to have 'follow through' as higher prices could very well trigger a supply response, potentially leading to loosening of lithium balances."

Lithium carbonate edged higher to CNY 75,500 ($10.663) per tonne after steadying at the three-year low of CNY 71,500 ($10,098)  through September, as economic stimulus from the Chinese government momentarily countered persistent oversupply concerns. Lithium carbonate prices have declined 21% in the year-to-date, adding to an 80% plunge in 2023 driven by the flood of new supply relative to dwindling demand for new electric vehicles, the main use for lithium. Still, market players expect global supply to soar by nearly 50% this year, as hopes of eventual balance in the market drove the race to secure battery metals drove China to expand projects in Africa while Chile signaled it would aim to double output over the next decade.

Adding to the bearish pressure are growing tariffs on China’s renewable energy products. Recently, the Office of the U.S. Trade Representative (USTR) finalized its plan to raise tariffs on a slew of Chinese goods, largely adopting hikes it first proposed in May. The expanded tariffs mainly target strategic product categories, including electric vehicles, batteries, solar cells, semiconductors and critical minerals.

The final tariff structure covers thousands of items under 14 product categories, with the first tariff hikes set to go into effect on Sept. 27 and the rest over the next two years. And, they are just as punitive as those of the Trump era: Chinese EVs have been slapped with a hefty 100% tariff; a 25% tariff on lithium-ion EV batteries, and a 50% tariff on photovoltaic solar cells. Meanwhile, a 50% tariff on China-made semiconductors will go into effect in 2025.

However, other lithium bulls are hanging on. BMI, a Fitch Solutions research unit, has predicted a lithium shortage could hit as early as 2025 largely due to China’s lithium demand exceeding supply.

“We expect an average of 20.4% year-on-year annual growth for China’s lithium demand for EVs alone over 2023-2032,” the report stated. In contrast, BMI sees China’s lithium supply growing at a much slower 6% annual clip over the same period, pointing out that that rate is not enough to meet even one-third of forecast demand.

BMI is not the only lithium bull here. “We do fundamentally believe in a shortage for the lithium industry. We forecast supply growth of course, but demand is set to grow at a much faster pace,” Corinne Blanchard, Deutsche Bank’s director of lithium and clean tech equity research, has told CNBC. Blanchard sees a “modest deficit” of around 40,000 to 60,000 tonnes of lithium carbonate equivalent by the end of 2025, but has forecast a much wider deficit to the tune of 768,000 tonnes by the end of 2030.

By Alex Kimani for Oilprice.com

 

And here are a number of other miners to keep an eye on this autumn:

BHP Group (NYSE:BHP), a global resources giant, showcases a diversified portfolio encompassing iron ore, copper, coal, nickel, and energy operations. With a substantial presence in Australia and the Americas, BHP’s operational scale is impressive. The company’s commitment to sustainable practices, including environmental impact reduction and community engagement, further solidifies its position as a responsible and forward-thinking leader in the global resources sector.

FMC Corporation (NYSE: FMC) Based in Philadelphia, FMC Corporation is a global agricultural sciences company delivering innovative technology to growers worldwide and has a significant stake in lithium for rechargeable batteries and other high-tech applications. The company’s agricultural products contribute to increased crop yield and quality, addressing global food security issues. FMC’s commitment to innovation and sustainability has driven robust demand for its crop protection products, supported by higher commodity prices and strong agricultural market fundamentals.

Lithium Americas (NYSE:LAC) has emerged as a significant player in the lithium market, driven by the growing demand for lithium-ion batteries in electric vehicles and renewable energy. The company’s Thacker Pass project in Nevada holds the potential to be one of the world’s largest lithium sources, positioning Lithium Americas as a major contributor to the global lithium supply chain. Strategic investments and partnerships with established industry players further enhance the company’s prospects for growth and expansion.

Albemarle Corporation (NYSE:ALB) stands as a global specialty chemicals leader, distinguished by its position as the world’s largest lithium producer. This prominence in the lithium market aligns with the surging demand for electric vehicle batteries, a key growth driver for the company. Albemarle’s diversified portfolio, encompassing bromine, catalysts, and pharmaceuticals, showcases its adaptability and commitment to innovation across various sectors.

Piedmont Lithium Limited (NASDAQ:PLL) is an Australian mining company focused on developing lithium resources in the United States. Its flagship Piedmont Lithium Project in North Carolina is projected to produce a substantial amount of lithium hydroxide annually, catering to the increasing demand for lithium-based products. Piedmont Lithium’s strategic partnerships with industry leaders like LG Chem highlight its commitment to building a robust supply chain for the burgeoning electric vehicle market.

MP Materials Corp. (NYSE:MP) holds a unique position as the sole operator of a fully integrated rare earth mining and processing facility in the United States. The company’s focus on producing rare earth oxides and metals, critical components in various technologies, is particularly significant given the growing demand for these materials in emerging sectors like renewable energy and electronics. MP Materials’ vertical integration model ensures quality and consistency in its products, further strengthening its market position.

Rare Element Resources Ltd. (TSX:RES) is dedicated to the exploration and development of rare earth elements (REEs), crucial components in clean energy technologies. The company’s flagship Bear Lodge project in Wyoming, recognized as one of the world’s largest undeveloped REE deposits, holds immense potential to contribute to the global supply of REEs. REE’s commitment to sustainable and responsible mining practices underscores its dedication to ethical resource extraction and environmental stewardship.

Avalon Advanced Materials Inc. (TSX:AVL) is a Canadian company specializing in developing and manufacturing specialty materials for diverse industries. With expertise in high-purity metals and alloys used in electronics, aerospace, and biomedical applications, Avalon plays a vital role in advancing various technological fields. The company’s focus on developing materials for energy storage solutions, particularly lithium-ion and solid-state batteries, demonstrates its commitment to innovation and addressing the evolving needs of the market.

First Quantum Minerals Ltd. (TSX:FM) is a Canadian mining and metals company with a diverse global portfolio. The company’s operations span multiple countries and encompass the production of copper, nickel, gold, and zinc. First Quantum’s commitment to responsible mining practices and community engagement is evident in its efforts to create economic opportunities and minimize environmental impact in the regions where it operates.

Allkem Limited (TSX:AKE), an Australian mining company, is a significant player in the lithium market. Its diverse portfolio of lithium projects in Australia, Argentina, and Canada, including a substantial presence in the lithium-rich Salar de Atacama, positions it as a major contributor to the global lithium supply chain. Allkem’s integrated approach to lithium production, spanning exploration, production, and refining, solidifies its role in meeting the growing demand for lithium in the electric vehicle and renewable energy sectors.

Teck Resources Limited (TSX:TECK), a Canadian mining powerhouse, is a leading producer of zinc and copper. Its extensive operations in Canada, the United States, Chile, and Peru contribute significantly to the global supply of these essential metals. Teck’s zinc production is particularly noteworthy due to its critical role in various battery technologies, aligning with the increasing demand for energy storage solutions across multiple industries.

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