Lithium has had a difficult beginning of this year, with prices in China falling by 30 percent since early Jan. Morgan Stanley attributed the significant price correction to stagnant demand, pointing out that opinions in the market are split as to whether prices will continue to decline or will eventually stabilise.– Iron Ore
According to the broker, it is uncertain that sales of ev vehicles would decline over the course of the year. This pattern should offer a foundation for a modest lithium price recovery.
It does not, however, foresee a continuation of the tremendous economic pace seen previous year.
The price of lithium is still at a historically high level, notwithstanding its recent reduction. While Citi analysts believe lithium prices could see short-term pressure, they also believe prices will rise steadily over time, with a potential recovery in the 2nd quarter of 2023.
Citi expects pressure to persist through the 1st quarter. But thinks that battery manufacturers’ restocking will help reduce pressure from the 2nd quarter. As a result, Citi lowers its pricing projection for lithium carbonate for the next three months from USD 60,000 to USD 40,000 & for the next 6 – 12 months from USD 55,000 to USD 50,000 per tonne.
DEMAND FEARS
Citi warns that even little adjustments to the demand & supply balances might have significant effects on pricing because of the enormous gap between market price & manufacturing costs.
According to Goldman Sachs, the Chinese real estate market’s recovery could be a major factor in driving iron ore prices even higher. This broker predicts a sizable deficit in the seaborne iron ore market to materialise in the first half of 2023, with expectations for a rise in steel output being fuelled by the current & ongoing recovery in the Chinese real estate sector.
According to Goldman Sachs, the initiation of real estate sales leads is often a sign that future steel demand will increase.
The rise in demand coincides with the lowest level of iron ore stockpiles in Chinese steel mills since 2016. According to Goldman Sachs, this might result in a 43 million tonne deficit in the forecast timeframe. The broker has raised its annual iron ore price expectations from USD 100 per tonne to USD120 per tonne. With a 3-month time horizon, the price might increase to 150/t dollar.
The broker continues to favors the more diversified RIO. Whose Canadian & Pilbara iron ore businesses manufactured 324 million tonnes and 10 million tonnes, respectively, in 2022, over pure-play manufacturer Champion Iron CIA which manufactured 7.9 million tonnes in 2022 but could double that number with the ramp up of its Bloom Lake Phase-2. Rio Tinto has been added to the Judgment List, and both has rated as Buy.
ZINC TURBULENT AFTER STOCK DROPS
However, a fresh zinc supply of about 680,000 tonnes was allowed for 2022. The Ozernoye, Gamsberg, and Kipushi projects are responsible for a significant share of the new supply. A comparable supply was authorised in 2021.
The Heermosa asset & the Dairi asset in Indonesiain North America are two sizable projects that the broker anticipates will contribute to additional supply, with the remaining supply being dispersed across other regions. According to Macquarie, Low prices and rising inflation could jeopardise project permits.
After underperforming in 2022, smelter losses are anticipat to diminish in 2023. Which is anticipat to lead to a more balanced market. A surplus, according to the broker, should start to appear in 2024 and should turn around by 2028. When a supply shortage should begin to appear.
There are plenty of available tonnes. According to Macquarie, who estimates that by the end of the decade. There might be new sources of 3.5 million tonnes of zinc annually.