January 10th, 2022 | 12:47 CET
BYD, Noram Lithium, NIO: The lithium market is developing a life of its own
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
BYD: Headwind for the e-car manufacturer
In China, the legal situation changes slightly with each new year. It recently hit the purchase premiums for e-cars, which were cut by 30% at the turn of the year. A similar step had already been taken in the previous year. At the end of 2022, the incentives are to end completely. However, the measures have been decided for some time. The subsidies were due to expire in 2020 but were extended in the wake of the pandemic.
The recent sell-off in BYD and NIO shares is likely to be only a minor correction. While the market environment for China, in general, is a burden, and Omicron is also an issue that should not be neglected in view of the weak efficacy of Chinese vaccines against the variant, Chinese e-car manufacturers are likely to have their luck in their own hands. Decisive in the battle for market share are price and quality. The latter is always a cause for concern. Recently, criticism of BYD e-buses delivered in the Netherlands made the rounds. Drivers complained about vibrations, broken heaters, crooked driver seats and insufficiently centered steering. As Western carmakers become increasingly electrically competitive, gap dimensions and other quality features are also gaining further importance among the innovative Chinese. BYD's share price recently suffered. The current price level must hold for the long-term upward trend to continue.
Noram Lithium: Lithium is becoming more and more expensive
The lithium company Noram Lithium, which is active in the USA, is far from being a threat to the upward trend - the share price has developed upwards in recent months like clockwork. Most recently, figures from China made the rounds, according to which the lithium price has risen to over USD 40,000 per ton. The price explosion for lithium meets an accelerating business development at Noram. The Canadians recently presented a preliminary economic feasibility study for their Zeus lithium project in the US state of Nevada. The Company also quoted a break-even price for the property around USD 4,016/t LCE LOM. While such figures are not yet set in stone at the current project stage, the significant gap to current market prices alone shows the potential that lies dormant in Nevada.
Noram Lithium plans to sell its products to customers in the USA, Europe and Asia in just a few years. Battery production in Nevada and neighboring states, in particular, is likely to be a hot candidate - after all, the US West Coast has always been considered "green" and tech-savvy. Currently, Noram's stock is valued at less than EUR 50 million. When a preliminary feasibility study is implemented next year, the Company's prospects should become even clearer. It cannot be ruled out that Noram will then follow the paths of other, already larger lithium players.
NIO: Good sales figures, weak share price
One of Noram Lithium's potential customers in the future could be NIO, in addition to BYD. All Chinese manufacturers are currently looking abroad. The markets there are not yet so saturated, and new groups of buyers are waiting. Although Western customers have to be convinced primarily by quality, the Chinese NIO have made significant progress in recent years despite all the criticism. The sales records also prove this. Just recently, NIO reported a delivery record for the fourth quarter. In 2021 as a whole, the Chinese brought 91,429 cars to customers. However, there is little sign of this record mood on the stock market. The share has been in a downward trend for around a year. From a chart perspective, NIO currently has little to offer.
While pure e-car manufacturers from China are currently weakening, the demand for lithium continues to grow, also thanks to the demand from traditional carmakers. Companies like Noram Lithium offer the opportunity for speculative investment in the lithium market due to the early development phase.
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