Core Lithium Ltd (ASX: CXO) shares rocketed 14% on 2 March this year after the lithium miner announced it had signed an Offtake Term Sheet with global electric vehicle manufacturer Tesla Inc (NASDAQ: TSLA).
The agreement would have seen Core Lithium supply Tesla with up to 110,000 dry metric tonnes of lithium spodumene concentrate from its Finnis Lithium Project, located in the Northern Territory. That was expected to commence in 2023.
That deal collapsed last Thursday. Core Lithium shares fell on the announcement. Though not as much as you might expect.
While the ASX lithium stock was down 10% early in the day, shares closed down 5.5%. And shares closed 3% higher on Monday with another 3.6% gain yesterday.
So, could canning the deal with Tesla actually be good news for Core Lithium shares?
No shortage of demand
While the agreement with Tesla was big news, there's no shortage of demand for lithium, a battery critical element found in most EV and grid storage batteries. Indeed, approximately 75% of the world's consumption of lithium currently goes into rechargeable batteries.
And the booming demand is only expected to increase in the years ahead.
According to the latest report from the Department of Industry, Science and Resources:
World demand for lithium is estimated to increase from 583,000 tonnes of lithium carbonate equivalent (LCE) in 2021 to 724,000 tonnes in 2022. Over the following two years, demand is forecast to rise by over 40%, reaching 1,058,000 tonnes by 2024.
That should certainly offer some continuing tailwinds for Core Lithium shares. As should the government's price forecasts. The report estimates that:
Spodumene prices are forecast to rise from an average US$598 a tonne in 2021 to US$2,730 a tonne in 2022, and US$3,280 a tonne in 2023 before moderating to US$2,490 in 2024. We expect lithium hydroxide prices to lift from US$17,370 a tonne in 2021 to US$38,575 a tonne in 2022 and US$51,510 in 2023.
So it's really no surprise that Core Lithium's CEO, Gareth Manderson didn't sound particularly concerned over the deal collapse with Tesla.
He noted that the company has agreements in place with Ganfeng and Yahua.
All told, Core Lithium has some 80% of its total concentrate sales over the first four years of operations at Finniss locked in under offtake contracts.
"I want to thank Tesla for the time taken to negotiate with Core and look forward to maintaining an open and ongoing dialogue," Manderson said.
He noted that in "an increasing lithium price environment" Core Lithium shares are "well positioned to capitalise on the high demand and current shortage of available battery grade lithium spodumene concentrate".
How have Core Lithium shares been tracking?
Tesla or no Tesla, Core Lithium shares are up a whopping 151% over the past 12 months. And shares are also 51% higher than the closing price on 2 March, the day the miner announced its offtake agreement with Tesla.
