Here’s what electric car makers look for when choosing lithium suppliers
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Battery metals players — particularly those in lithium — continue to lead a bullish resources sector with strong 12-month share price performances.
ASX lithium stocks tracked by Stockhead have made big gains over the past year – led by Kidman Resources (ASX:KDR), which is up 409 per cent after it shook hands with American car giant Tesla.
There are more than 100 ASX stocks that offer exposure to lithium according to leading ASX data provider MakCorp.
Of these, more than two-thirds have made gains over the past year.
>> Scroll down for a list of ASX stocks with lithium exposure, courtesy of leading ASX data provider MakCorp
Despite a pull-back earlier this year due to over-supply concerns — only a quarter of lithium stocks are ahead since January — there is confidence of growing demand from battery and electric car makers.
Specifically, miners who produce lithium hydroxide are likely to witness increased interest, according to market intelligence firm Roskill.
Lithium hydroxide is mainly used to produce lithium greases, but it is also used as a heat-transfer medium and as a storage-battery electrolyte.
Lithium carbonate, however, has been the more widely produced compound and is usually the first product in the lithium production chain.
Lithium hydroxide in vogue
That is now changing with lithium hydroxide becoming more popular among electric car battery makers because it can produce cathode material more efficiently.
It is also a key component for the cathodes that go into the nickel-cobalt-aluminium batteries favoured by Tesla and the nickel-cobalt-manganese batteries that are more popular with rival car makers.
The cathode is used to conduct electricity flows out of a battery or device.
“Despite its higher price, lithium hydroxide offers higher performance in lithium-ion batteries, especially given the new regulatory requirements in countries such as China where range and energy density is strictly controlled,” Roskill said in a new lithium market report released this week.
In 2017, around 30 per cent of the lithium used in automotive lithium-ion batteries was lithium hydroxide and this proportion is expected to increase within the next decade, Roskill noted.
The three-year deal, which has an option for a further six years, is for the supply of lithium hydroxide.
Lithium Australia boss Adrian Griffin told Stockhead earlier this week there was “absolutely no doubt” Australia’s lithium miners would see more of these types of deals.
Roskill says Tesla’s production target of 1 million electric cars by 2020 implies a lithium requirement of around 50,000 tonnes of lithium carbonate.
Demand from car makers passed 34,000 tonnes of lithium carbonate equivalent last year and Roskill sees that more than doubling by the end of the decade.
Last year rechargeable batteries accounted for 43 per cent of total lithium demand and that will continue to grow with the car industry now the biggest influencer on the lithium industry.
Over the past year about 70 ASX-listed lithium stocks have made share price gains.
Here’s a list of ASX stocks with exposure to lithium courtesy of leading ASX data provider MakCorp. (Scroll or swipe for full table)
Market darling AVZ Minerals (ASX:AVZ) has followed Kidman’s lead with a 341 per cent jump, while GWR Group (ASX:GWR) added 338 per cent to its share price and European Lithium (ASX:EUR) jumped 335 per cent.
However, the picture is much different since the start of this year, with only around 25 stocks making gains.
Diversified explorer GWR, which through its wholly owned subsidiary RWG Minerals is exploring for lithium in Western Australia, notched the biggest gain of about 119 per cent in the first five months of this year.
Stockhead is proud to use MakCorp as a provider of great value, accurate and reliable data on ASX-listed mining stocks. For more information head to MakCorp’s website.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.