.@BMO Raising #Lithium prices on #EV Growth- Upgrades $SQM, $ALB to Outperform

BMO analyst Joel Jackson, known for being prudent on Lithium, turning more positive on the sector for the following reasons:

 

1-      Lithium prices are only starting to rise. See charts below.

2-      We now see prices for lithium carbonate going from $6,75k/t today to $7,5k/t in 2021 and then average $10,0k/t by 2023

3-      WE now see EV penetration to grow from 3.9% in 2020 to 5% in 2020 and 12% by 2025.

4-      Recent data have shown an acceleration with Chinese EV sales up 120% in November yoy and Europe tripling

5-      Joel also sees lithium supply basically not rising in 2021 before a supply boost in 2022/23. See charts below.

6-      Joel is now using 18X EV/EBITDA multiple targets up from 12X justified by: 1- 20% demand CAGR for lithium, 2- Scarcity of liquid investments in the space, 3- ALB’s lithium unit has traded at 18X for the past five years

7-      SQM and ALB trade at 30% discount to their SOTP. Details below and attached. Joel is upgrading SQM to Outperform.

 

#Lithium Cartel: The emerging oligopoly in key #battery element #EV $ALB $SQM

#Tianqi Lithium Corp. will pay $4.1 billion to buy Nutrien Ltd.'s 24 percent stake in Soc. Quimica & Minera de Chile SA, or SQM, in a deal that will entangle the biggest and fourth-biggest producers of the battery metal. The transaction could theoretically give Tianqi half of the board seats

https://www.bloomberg.com/amp/view/articles/2018-05-18/time-to-block-the-lithium-cartel?__twitter_impression=true

The Lithium Cartel Should Be Stopped

Why are we so relaxed about an emerging oligopoly in the key battery element?

More stories by David FicklingMay 18, 2018, 5:16 AM EDT

The stuff of lithium dreams in Chile.

Photographer: Michael Smith/Bloomberg

The world doesn't like its essential commodities being controlled by a small group of producers.

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So why is there so little noise about the emerging oligopoly in one of the hottest elements on the periodic table, lithium?

Tianqi Lithium Corp. will pay $4.1 billion to buy Nutrien Ltd.'s 24 percent stake in Soc. Quimica & Minera de Chile SA, or SQM, in a deal that will entangle the biggest and fourth-biggest producers of the battery metal. The transaction could theoretically give Tianqi half of the board seatsThe transaction could theoretically give Tianqi half of the board seats, though other major shareholders who've historically guarded their interests have opposed such a path.

Here's how the lithium carbonate market is structured at present: North Carolina-based Albemarle Corp. is the market leader, with an 18 percent share, followed by Jiangxi Ganfeng Lithium Co. on 17 percent; SQM on 14 percent; and Tianqi on 12 percent. Other players have the 39 percent or so that remains — the largest among them being FMC Corp., which is soon to offer its shares to whoever wants them in a planned initial public offering.

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