Rodney Hooper: Price isn’t Everything When Choosing Lithium Stocks

TL;DR

Rodney Hooper discusses trends and surprises in the EV industry, including subsidy cuts in China, growth in Europe, oversupply in the lithium market, and the potential for market disruption in the future.

Transcript

priscila beretta with the investing news network and here with me today is Rodney Hooper whose consultant in the lithium industry Rodney thank you so much for joining us again thanks very much for having me Owen Priscilla all right so we are here at the benchmark minerals week just I just wanted to ask you I know the last time we spoke was in June ... Read More

Key Insights

• 🥺 Subsidy cuts in China have significantly impacted EV sales, while CO2 emission penalties in Europe have led to increased sales.
• ❓ The oversupply in the lithium market has resulted in companies struggling to make a profit and potential expansions being pulled back.
• ⏫ The paradox of double-digit growth in lithium demand and declining prices is expected to continue in 2020.
• ❓ Consolidation in the lithium market may increase as more value becomes apparent and quality resources become scarcer.

Questions & Answers

Q: How have subsidy cuts in China affected EV sales in the country?

The removal of incentives and lower subsidies in China has led to a significant decrease in EV sales, particularly in the smaller car segment with lower energy density and range. Sales have fallen off a cliff as a result.

Q: What has been the biggest news or surprise in the lithium industry?

The oversupply of spodumene concentrate producers in Australia has exceeded expectations, leading to companies struggling to make a profit and some going into administration. Additionally, there has been a drop in demand and oversupply in the chemical sector, causing some potential expansions to be pulled back.

Q: Will the paradox of double-digit growth in lithium demand and declining prices continue in 2020?

The balance between supply and demand is crucial, and the oversupply has been a result of lower demand than expected. However, with potential subsidy delays in China, increasing model choices and expansions in Europe, and upcoming vehicle releases from major automakers, there is hope for a more balanced market in 2020.

Q: Do you expect to see more consolidation in the lithium market in 2020?

While some deals have already occurred, premiums paid in the past have slowed down further acquisitions and mergers this year. However, as the value in the lithium space becomes more apparent and quality resources become scarcer, there is a possibility of more consolidation in 2020, with juniors needing to partner with incumbents to meet demands.

Summary & Key Takeaways

• In China, the removal of buyer incentives and lower subsidies has led to a significant decrease in EV sales, while Europe has seen a rise in sales due to CO2 emission penalties.

• The lithium market has experienced oversupply, resulting in companies struggling to make a profit and some potential expansions being pulled back.

• Despite double-digit growth in lithium demand, prices have declined, with the paradox expected to continue in 2020.