Lithium M&A News to Continue in 2023 as Consolidation Ramps Up

Will the Livent/Allkem deal deliver extra lithium provide to market?

Bringing new lithium provide on-line is just not a straightforward job as delays are frequent, with the true query being as a rule how late initiatives will likely be. However to fulfill the bold net-zero objectives set by governments around the globe, lithium provide might want to enhance.

“In idea, the merged firm can have increased free cashflow and can be capable to focus its consideration on probably the most worthwhile initiatives they personal, which ought to end in an accelerated provide of chemical substances,” Hooper stated.

In the meantime, Lowry doesn’t suppose there will likely be extra lithium within the subsequent 5 years due to this transaction.

“I believe you must take it step-by-step. I believe it places it in movement, however we’ll see how the mixing of the 2 firms goes … they arrive from very totally different cultures,” stated Lowry, who can be host of the World Lithium Podcast.

Will lithium sector consolidation proceed in 2023?

The Livent/Allkem merger has attracted consideration just lately, however different lithium M&A has additionally made headlines.

Earlier in 2023, prime lithium producer Albemarle (NYSE:ALB) made a US$3.7 billion takeover supply for Australia’s Liontown Sources (ASX:LTR,OTC Pink:LINRF), though it was rejected. One other Australian firm, Important Metals (ASX:ESS,OTC Pink:PIONF), declined a bid from a three way partnership shaped by main producers Tianqi Lithium (OTC Pink:TQLCF,SZSE:002466) and IGO (ASX:IGO,OTC Pink:IPGDF).

Hooper believes extra M&A exercise is forward for the lithium sector in 2023 and past.

“Any giant useful resource undertaking in a Tier 1 jurisdiction will probably be purchased out or merged,” he stated. Regardless of the offers signed with junior miners in latest months, for the knowledgeable, unique gear producers must get extra concerned. “Offtake agreements are an inadequate hedge; in addition they must lock in decrease long-term lithium costs,” Hooper added.

Lithium knowledgeable Lowry additionally expects extra consolidation within the lithium house.

“I believe you may see a number of the higher small exploration performs in Western Australia simply get absorbed before they might have in any other case, simply because it’s a seize for the rock now,” he stated. “Why wait till they’ve a market cap of $500 million In the event you can decide them off once they’ve received a market cap of $50 million?”

Ideas for traders as lithium M&A heats up

Lithium traders have seen costs in China fall since November. In response to Fastmarkets information, thus far this 12 months, costs are down roughly 60 % on the again of elevated provide, destocking dynamics, decrease downstream demand and bearish sentiment.

For Lowry, it is necessary to give attention to what spodumene has been doing as a substitute of simply taking a look at China’s spot worth.

“Spodumene units the fee curve,” Lowry defined. “The narrative on lithium costs has been incorrect for therefore lengthy … I proceed to take care of that the typical worth paid for lithium chemical substances in 2023 will likely be increased than 2022, and the primary 4 months of the 12 months completely show that.”

Shares of each Allkem and Livent rose after their merger was introduced. With that in thoughts, how ought to traders react once they see new developments within the lithium trade?

“I believe if you happen to’ve received a core technique that you simply’re assured in, anytime new data occurs, have a look at what you are doing funding clever in gentle of recent data,” Lowry stated. “However I do not suppose most individuals must (change their technique).”

For his half, Hooper stated traders ought to understand that the lithium sector is seeing a transparent divide between China and the remainder of the world, together with the US and Europe.

“The ex-China electrical automobile and vitality storage methods markets are rising considerably, and now the US and Europe supply significant incentives to produce into their chains,” Hooper stated. “The lithium sector will see offers occur that optimize the advantages (primarily based on strict necessities) on supply from laws in these areas that maximize earnings.”