Chart of the Week: Lithium is rebounding on rising demand
The mining sector is significantly overvalued on average but select value to be found.
This week’s insights come from the latest industry pulse on Mining by Jon Mills and Alex Anderson.
Lithium soars as most mined commodity prices up
The lithium price more than doubled last quarter as the market surplus shrank on rising demand for use in electric vehicles and battery energy storage systems, and as supply growth slowed.
Prices are now around USD 20,000 per metric ton which is in line with our outlook for the marginal cost of production. We expect prices to remain at this level as the market remains in balance following oversupply in 2024 and 2025.
Just as record-high prices in 2022 encouraged strong supply growth, low prices halted investment by many producers. This caused global supply growth to slow in 2025, moving the market to balance.
Some lithium companies are highly leveraged due to the recent cyclical downturn, but we think stronger lithium prices will allow them to quickly deleverage.
We think Mineral Resources is cheap with dhare trading around 30% below fair value, whilst Albemarle is moderately undervalued. Both will likely benefit from stronger lithium prices and, for Mineral Resources, from increasing iron ore volume. This, in turn, likely drives deleveraging for both firms.
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You can find previous editions of Chart of the Week here.
