Lithium May Be Overpriced, says Morgan Stanley

Morgan Stanley claims lithium price will plunge 45% by 2021, Pilbara Minerals not fazed

One of the world's most eminent investment banks, Morgan Stanley, has thrown a potential spanner in the works of the burgeoning lithium industry. Despite the gloom, Pilbara Minerals (ASX: PLS) has just secured an $80 million lithium concentrate offtake deal with South Korea's POSCO.

 From article, (Lithium prices have more than doubled over the past two years fuelled by rampant demand for devices and products that use lithium-ion batteries.

Mobile phones, laptops, tablets and electric cars have emerged as the front-running products to which the lithium-ion battery industry is most connected to.

A variety of companies from different sectors have begun to secure ample lithium supplies in order to facilitate ambitious production schedules that are expected to put over ten million new electric cars on the road just in the US alone, within the next 5 years.

Carmakers such as Tesla in the US and BYD in China, who estimate even steeper electric-car adoption rates, are responding to consumer demand for more efficient and reliable vehicles, but this has put pressure on existing supplies which many analysts predicted would be insufficient on a global scale.

But according to Morgan Stanley, Chile as a standalone country “threatens” to add at least 500,000 tonnes of lithium production in the coming years, thereby deflating any lithium inflation fears. The bank also says that “it would take much higher EV penetration rates to offset these surpluses.”

 Morgan Stanley, has thrown a potential spanner in the works of the burgeoning lithium industry.

In a research report published this week, the bank predicts the current growth of electric car sales to undershoot current expectations, thereby stoking fears that previous lithium supply shortages will become a redundancy and possibly leaving stockpiles of the metal unsold.

One of the major takeaways from the report, is that Morgan Stanley stipulates a required rate of 31% of all new cars sold being of the electric variety, for the current rate of lithium supply to balance with demand.

The bank says the current rate of new electric cars sold is only around 2% and would have to rise significantly to at least 31% by the year 2025 to “clear the market.”)

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