- The prices of lithium jumped multi-fold in 2021, backed by a spectacular increase in the demand for electric vehicles.
- Amid strong lithium market dynamics, the share price of Jindalee jumped by about 175 per cent last year.
- Lithium demand is expected to grow stronger over the coming years.
Lithium was one of the hottest commodities of 2021, whose prices jumped multi-fold as the demand for metal outstripped supply. Driving the frenzy was lithium’s role in shifting the world towards a greener economy, as it remains a crucial component for the rechargeable batteries used to power EVs (electric vehicles).
The awakening of global resources investors to the reality of the green energy transition ruled in favour of certain ASX-listed lithium explorers, including Jindalee Resources Limited (ASX:JRL). The share price of Jindalee rallied by about 175 per cent in 2021 despite all COVID-19-driven challenges related to the highly contagious Delta variant.
Related Read: Jindalee Resources to enter 2022 on a strong footing
The Company owns two large-scale lithium projects in the US – McDermitt and Clayton North. McDermitt is the more advanced of the two and one of the largest lithium deposits in the USA. The development of McDermitt could assist the US to become self-sufficient in the battery metal, and hence it is critical to the domestic security of supply.
Strong market dynamics
In its FY21 annual report, Jindalee highlighted that not even the ongoing disruption to economic activity wrought by the COVID-19 pandemic is likely to stymie the replacement of fossil fuels with renewable energy derived from solar, wind, and hydro sources. This comprises energy for transportation in the form of EVs.
With several countries now mandating the cessation of internal combustion engine production, exponential growth is predicted in the number of EVs, with unsurprising impacts for demand in the materials required for their manufacture. In turn, these dynamics have supported recent strength in the prices of lithium chemicals and focused investor attention on possible sources of future lithium supply to the EV industry.
Currently, the US imports most of its lithium, leading to the metal being included on the US Department of the Interior’s list of minerals critical to the US economic and national security. Meanwhile, emerging lithium projects are receiving strong bipartisan support in the US. Jindalee’s McDermitt project holds the potential to materially change US lithium supply dynamics amid its close proximity to major lithium customers.
Lithium demand is expected to grow stronger over the coming years, dominated by the automotive industry. Amid robust demand and looming supply shortage as electric vehicles aggressively drive the need for lithium, the price of the metal is likely to rise further.
In future years, Jindalee expects a much greater focus on sustainability aspects of the lithium supply chain from lithium consumers, including the embedded carbon cost of transportation of unprocessed concentrates across large distances to reach battery manufacturers, refiners and ultimately, producers of EVs themselves.
As per Jindalee, the aspiration of the US automotive industry is ideally to have a “closed system” of electric vehicle production within the country, focusing attention on opportunities for local extraction and supply of lithium.
The year 2021 saw strong demand for most of the commodities, including lithium, amid a recovering economy. It will be interesting to see if the demand will continue to strengthen this year or the emergence of new COVID-19 variants will disrupt commodity markets. Most likely, lithium prices are expected to remain elevated until the battery industry finds new sources to expand output. Any boost in the metal’s value is expected to be good news for ASX emerging lithium producers, like Jindalee, which could benefit over the long run.
Jindalee’s shares are trading at A$2.530 as of 1:00 PM AEDT.