Canaccord Report Forecasts Higher Long-Term Prices for Lithium Producers



Canaccord Genuity Forecasts Higher Long-Term Prices for Lithium Producers as EV Demand Shows No Sign of Slowing Down

Canaccord Genuity Capital Markets has released its latest report for the electric vehicle (EV) materials market titled  “Lithium | 2H’22 recharge: “giga-demand” needs major supply growth,” covering several lithium producers and raising price targets across the board. 

The elevated pricing follows a general sentiment that supply is expected to increase as 2022 sales of electric vehicles are on track to record 40% year-over-year growth, and lithium demand remains high despite general recession concerns in the EV materials market, driven by increasing average battery sizes.

According to Canaccord’s “giga-demand” scenario, lithium demand could be significantly higher than the capital markets firm previously forecast, with an implied lithium carbonate equivalent (LCE) demand of up to 5 million tonnes (Mt) LCE compared to a Canaccord Genuity estimates (CGe) base case of 2.8Mt. 

Lithium prices hit all-time highs in 2022, which Canaccord analysts attribute to “continued strong demand in the face of a lagging supply response.” 

Since its last report, Canaccord stated that lithium product pricing has “surpassed our prior expectations to new all-time highs,” and while the firm warns that current lithium prices may not be sustainable long-term, it has not ruled out the potential for prices to achieve new highs in the near term. 

“In our view,” states the report, “sustained peak pricing will continue to incentivise new capacity, while also impacting battery costs and EV prices.” 

Canaccord has updated its 2022 pricing to reflect ongoing market tightness, increasing target prices across its coverage portfolio by an average of 15%. However, the report cautions, “as new projects come into production in late 2022 and into 2023, we continue to expect prices to correct.” 

During this “unprecedented” period of transformation for lithium, the Canaccord report looks to iron ore as a precedent in the commodity market to determine lithium pricing outcomes. Like iron ore, which saw major structural changes in market dynamics with massive increases in steel production and industrialization in China, the lithium market is expected to be driven by advancements in electrification and the energy storage market, leading to what the report calls a “reset” of the historical relationship between pricing and supply/demand. 

As lithium companies announce accelerated expansions, mine starts, and project development timelines, the Canaccord report includes key near-term revisions in lithium market supply forecasts.

The report features several lithium producers and developers (with a preference for the former over the latter), including the following four top picks: 

  • Allkem Limited (ASX:AKE) with a Buy rating and a 25% target price increase to AU$21.30; 
  • Pilbara Minerals (ASX: PLS) with a Buy rating and increased target price of AU$4.50, up 25% from the previous $3.60 target price; 
  • Sigma Lithium (TSXV:SGML) with a Spec Buy rating and 45% increase in target price to CA$45.00; and 
  • Leo Lithium (ASX:LLL) with a Spec Buy rating and 90% target price increase to $1.90. 

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