Seen in a financial newsfeed regarding lithium pricing:
"Lithium today is starting to look a lot like iron ore of 20 years ago, a comparison which includes the potential for miners of the battery metal to become tomorrow’s yield stars.
While it has never been wise to treat any natural resource company as a reliable dividend generator because of the potential for extreme moves in commodity prices, there can be exceptions at times when prices stay higher for longer.
In the case of iron ore, which has enjoyed long-lasting record prices thanks to China’s industrial revolution, Australian miners such as Fortescue Metals Group and BHP have become important sources of dividends for many investors.
Lithium is riding the equivalent of the China boom, only bigger, in the form of the global energy transition which has sparked a rapid increase in demand, especially from electric vehicle (EV) makers at a time of a significant shortfall in supply.
The result is a lithium price which has punched through the ceiling. While there are multiple ways of trading the metal it is in its form as a concentrated ore (spodumene) that the spectacular price rise can be best measured – and in which also lies a warning about commodity risk.
Over past two years the price of spodumene, which generally contains 6 per cent lithium, has rocketed up by 900 per cent from around $US400 a tonne in 2020 to recent trades booked at $US4000/t with the potential to keep rising. Credit Suisse, an investment bank, sees a future possible price of $US7000/t.
Given that most Australian producers of spodumene concentrate operate on a cost base of less than $US500/t it’s obvious that profit margins are spectacular.
In its processed form as lithium carbonate or lithium hydroxide, the numbers are even more impressive with a tonne of carbonate selling in China for up to $78,000, a remarkable 1047 per cent higher than the $6800/t of 18 months ago."