Key points
- Demand for lithium may be twice what the market is expecting if swappable batteries became an industry standard, according to Macquarie
- The potential trend is likely to put even more upward pressure on lithium prices, which are testing new highs this month
- ASX lithium shares at the top of Macquarie's buy list are the Pilbara Minerals share price and the Mineral Resources share price
Booming demand for lithium could be twice as bad as experts are predicting if an emerging trend takes hold, according to a top broker.
Some electric vehicle (EV) industry insiders are betting on swappable batteries. If this is because of the industry standard, it could put upward pressure on lithium prices, according to Macquarie.
Swappable batteries for EV could be a major trend
Swappable vehicle batteries are seen as an ideal way to overcome "range anxiety". Instead of recharging, drivers can just exchange their batteries for a fully charged one.
The other advantage is that swappable batteries could lower the cost of purchasing an EV. This is because EVs may be bought without a battery and drivers could subscribe to a battery swapping service.
If the concept takes off, it would be great news for ASX lithium shares, according to Macquarie.
How swappable batteries can trigger demand shock
"Macquarie EV, battery materials, basic materials team recently had a deep dive into battery swapping and believed battery swapping could double battery demand esp. for ternary batteries, benefiting upstream battery materials, esp. cathodes, separators, lithium," said the broker.
Even as things stand now, lithium product prices in China have already reached new records in the first half of January.
Lithium prices reaching new highs
"Chinese spot technical and battery grade lithium carbonate prices (non-VAT adjusted) reaching new highs of Rmb342,500/t (~US$54,000/t) and Rmb358,500/t (~US$56,500/t), respectively," said Macquarie.
"Realised spodumene prices also increased further and broke US$2,690/t mid this week. Platts Battery Metals reported on 21st Jan that spot spodumene concentrate (6% Li2O) sales were being quoted around US$3,000/t (FOB, Australia), a new all-time high."
What is driving the strong prices is an expectation that demand from the US, EU and China will increase substantially due to the popularity of EVs in those key markets.
ASX lithium shares to buy
The adoption of swappable batteries will make the imbalance worse, although the crash in ASX lithium shares today is contradicting the strong outlook.
The Liontown Resources Limited (ASX: LTR) share price slumped 7.1%, Allkem Ltd (ASX: AKE) share price tanked 5%, and Pilbara Minerals Ltd (ASX: PLS) share price shed 2% at the time of writing.
But this could be a buying opportunity as Macquarie rates most of the ASX lithium shares as "outperform".
The broker's favourite picks are the Pilbara share price and the Mineral Resources Limited (ASX: MIN) share price.
