Last year, Macquarie warned that there the market would be “significantly oversupplied” from 2017 onwards.
In April, Pilbara Minerals managing director Ken Brinsden told MNN Macquarie had its view of the lithium world “completely wrong”.
“They are grossly understating chemical conversion capacity in China, both currently and the near-term in term of expanded capacity, and it’s a shame, because it’s not consistent with what we see in the way of growth emerging for potential buyers of lithium raw materials,” he said at the time.
Yesterday, Macquarie upgraded its outlook for the battery minerals space, but said it remained “highly volatile”.
“The landscape is continually changing but developments appear to be trending in a clearer direction,” analysts said.
“Demand drivers, principally Chinese policy and more commitments from the likes of BMW, Daimler and other European auto manufacturers, are firming.
“Meanwhile new supply from both incumbents and new hopefuls is taking longer than expected to eventuate and the time scale of a deficit looks likely to extend.”
Macquarie now says that a supply deficit will extend into the early 2020s, with Australian spodumene best-placed to fill the void as Chilean brine production trended sideways.
“Whilst progress is being made the ramp-up of new supply at Mt Marion and Mt Cattlin has been slower than anticipated,” it said.
“It appears that technical difficulties at the mines and potentially in integrating new concentrate feed into existing conversion capacity are abundant.
“That being said we expect these to be overcome in time but the door for additional development projects like Pilgangoora remains open.”
On pricing, Macquarie still sees lithium coming off current peaks, but lifted its forecasts.
The forecast lithium price for 2017 was lifted by 4% to US$9925 per tonne, with rising Australian production to push prices down to $8000/t in the fourth quarter.
The biggest upgrades were for 2020 and beyond, with lithium price forecasts for 2020 and 2021 lifted by 19% to $8000/t, and the long-term price raised by 17% to $7000/t.
But Global Lithium president Joe Lowry said Macquarie’s estimates were still wrong.
“The Macquarie new lithium price estimates are still laughably low. They clearly don't understand the cost curve or the market,” he said via Twitter.
Macquarie’s updated price forecasts led to ratings upgrades for a number of lithium players.
Fully funded Pilbara Minerals was upgraded to outperform from underperform, with its price target bolstered by 33% to A50c following $200 million-plus in raisings in the past week.
“Whilst our more bullish price forecasts are a key driver of improved earnings the company has significantly de-risked the funding and technical delivery of the project,” Macquarie said.
“We now see its Pilgangoora project as a significant contributor to the future supply mix.”
Current producer Galaxy Resources was also lifted to outperform from neutral, while developer Altura Mining was raised to neutral from underperform.
