• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Fat Tail Daily

Investment Ideas From the Edge of the Bell Curve

  • Menu
    • Commodities
      • Resources and Mining
      • Copper
      • Gold
      • Iron Ore
      • Lithium
      • Silver
      • Graphite
      • Rare Earths
    • Technology
      • AI
      • Bitcoin
      • Cryptocurrency
      • Energy
      • Financial Technology
      • Bio Technology
    • Market Analysis
      • Latest ASX News
      • Dividend Shares
      • ETFs
      • Stocks and Bonds
    • Macro
      • Australian Economy
      • Central Banks
      • World Markets
    • Small Caps
    • More
      • Investment Guides
      • Premium Research
      • Editors
      • About
      • Contact Us
  • Latest
  • Fat Tail Series
  • About Us
Latest

A Tale of Two Energy Economies

Like 0

By Selva Freigedo, Wednesday, 17 May 2023

While markets continue to be bogged down by the US debt ceiling and talks of recession, the lithium recovery is well underway.

It’s a sea of red out there.

Overnight, markets finished lower after the US failed to once again pen a deal on the debt ceiling, with concerns of a recession continuing to grow.

Oil prices — a good indicator of economic activity — are down 12% in the last month.

Natural gas prices are also down more than 70% year on year. This is quite a change from last year when prices soared as Europe headed for a long winter and supply from Russia was uncertain.

There’s now talk that the gas market is oversupplied after a mild winter, and Europe was able to fill up its storage deposits with LNG imports.

Still, things are looking a bit tight in the oil and gas space.

The conflict with Russia, a global oil and gas producer powerhouse, still rages on, and there’s very little gas flowing from Russia into Europe.

Things could also turn around quickly in this space if demand from China picks up or cold temperatures hit the Northern Hemisphere later this year.

It’s something we will continue to keep an eye on.

But things have definitely turned in another corner of the energy market: lithium.

Lithium prices are waking up

By now you’ve likely heard lithium prices are recovering.

Even Morgan Stanley, who’s traditionally been quite negative on lithium, agrees.

As they said in a note recently:

‘Although China’s EV sales and battery production are back in growth mode after a lacklustre start of the year, cathode and battery cell producers are still not fully back buying in the spot market, but sentiment is clearly improving and their lithium inventories appear to have eroded.

‘Unlike for nickel and cobalt, we still model a full-year lithium market deficit for 2023, and we expect the recently oversupplied lithium market to become tighter again for the remainder of 2023.

‘Therefore we think the market can stay relatively right for 2023, but the shortfall will be much less than last year.’

As the bank noted, Australian spodumene production came in below expectations during the first quarter of 2023. Exports from Chile, the second-largest lithium producer in the world, also weren’t great.

What’s more, there’s been some uncertainty coming out of Chile when it comes to future lithium production.

And then mergers and acquisitions have been heating up in the lithium space.

Allkem [ASX:AKE] and Livent recently announced they’ll be merging to form a massive $16 billion market cap company to take advantage of the strong demand of lithium.

Also earlier this year, Tianqi, in a joint venture with IGO [ASX:IGO] made a bid for Australian lithium explorer Essential Metals [ASX:ESS], an offer that got rejected.

And then Albemarle tried to buy Liontown Resources [ASX:LTR] and was turned down…three times. Albemarle hasn’t given up, though the company says it’s still looking around to snap up opportunities in the lithium space.

So there’s still a bit of a frenzy when it comes to securing lithium supply.

It’s been a roller coaster ride for lithium prices

Chinese lithium carbonate prices dropped around 70% at the beginning of the year, as you can see below:


lithium carbonate prices

Source: Tradingeconomics

[Click to open in a new window]

The falls though are starting to reverse and lithium prices are up 16% for the month.

It’s starting to flow into lithium stocks. Lithium producer Pilbara Minerals [ASX:PLS], for example, is up 26% for the month.

Truth is that while lithium prices have dropped, they are still higher than previous years, and lithium producers could continue to make a bundle.

Prices should continue to remain strong as demand for lithium continues.

For one, EV sales are recovering.

Even with the end of EV subsidies in China, the largest EV market in the world, sales continue to grow. In the first quarter of the year, EV car sales were up 25% from the same period last year.

Automakers are still in a frenzy to secure raw materials and secure market share in the EV space.

On the supply side, it takes time to find lithium, get permits, and build a mine.

Lithium needs to be processed before it’s used in lithium-ion batteries. And while most mining happens in countries like Australia and Chile, battery production is very much concentrated in China.

Although the US and the EU are trying to catch up when it comes to growing their onshore lithium-ion battery production, having much of the production in one place could cause hold ups.

So overall, lithium’s future is still looking quite exciting indeed!

Of course, according to my colleague James Cooper, there’s another commodity worth keeping tabs on.

In fact, it could be the next resource to ‘do a lithium’, so to speak.

And there are only four days of it stockpiled globally. Find out more here.

All the best,

Selva Freigedo Signature

Selva Freigedo,
Editor, Fat Tail Commodities

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

Comments

Subscribe
Notify of
guest
guest
0 Comments
Inline Feedbacks
View all comments
Selva Freigedo

Selva’s Premium Subscriptions

Publication logo
Fat Tail Investment Research

Latest Articles

  • Oil price threat to the market: a fizzer…so far
    By Callum Newman

    The market usually doesn’t sell off in a big way when we get the kind of geopolitical flashpoint we’re seeing now. However, I must admit I still expected the Aussie market to be down at least a little bit this morning. As I write, it’s mildly green. Are investors being too complacent here?

  • Ford Shuts Its Doors as Rare Earth Grip Tightens
    By James Cooper

    James Cooper highlights the emerging cracks in industry as the effects of Chinese rare earth bans take hold.

  • China’s Game of Commodity Chicken
    By Charlie Ormond

    When commodities become weapons instead of just market goods, traditional investing rules break down.

Primary Sidebar

Latest Articles

  • Oil price threat to the market: a fizzer…so far
  • Ford Shuts Its Doors as Rare Earth Grip Tightens
  • China’s Game of Commodity Chicken
  • Ride Mining’s Profitable ‘Curve’ this Way
  • Silver & Platinum Squeeze Higher

Footer

Fat Tail Daily Logo
YouTube
Facebook
x (formally twitter)
LinkedIn

About

Investment ideas from the edge of the bell curve.

Go beyond conventional investing strategies with unique ideas and actionable opportunities. Our expert editors deliver conviction-led insights to guide your financial journey.

Quick Links

Subscribe

About

FAQ

Terms and Conditions

Financial Services Guide

Privacy Policy

Get in Touch

Contact Us

Email: support@fattail.com.au

Phone: 1300 667 481

All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in our reports are forecasts and may not be a reliable indicator of future results. Any actual or potential gains in these reports may not include taxes, brokerage commissions, or associated fees.

Fat Tail Logo

Fat Tail Daily is brought to you by the team at Fat Tail Investment Research

Copyright © 2025 Fat Tail Daily | ACN: 117 765 009 / ABN: 33 117 765 009 / ASFL: 323 988