Battery Metals to Continue Charging Market Energy
THE CONFERENCE CALLER: Far East Capital chairman Warwick Grigor declared battery metals have the strongest outlook of any resources sector as other areas continue to experience a lull.
Thumping the lectern on the opening morning of the RIU Resources Round-up in Sydney, Grigor told the big crowd how share prices of leading lithium stocks had pulled back taking graphite stocks along for the ride.
Despite being something of a market favourite at present, Grigor said cobalt stocks, which have flourished more recently, have softened, a trend he expects will continue.
“I can only see downtrends in cobalt stocks at the moment,” he said.
He then warned potential investors that they shouldn’t get side-tracked by market booms and bubbles.
“The market has trouble hanging onto an idea for more than three months,” he continued.
“FOMO is the overriding fundamental of the stock market – true fundamentals are very much a secondary consideration.”
Mentioning the world’s most famous climate change denialist, US President Donald Trump, Grigor said he considers there to have been too much invested in renewables to date to slow the momentum and demand for battery metals.
This, according to Grigor, means the market’s battery powering favourites of lithium, graphite and cobalt had the strongest demand outlook of any mining commodities.
He was careful however, when speaking about lithium, presenting a bearish outlook for the long-term, based on research from Macquarie.
“It’s the opinion of Macquarie that we won’t see lithium prices move any higher,” he said.
“Lithium prices are unlikely to move any higher due to the expected supply response.”
Grigor explaind that the lithium market remains fairly well controlled by the dominant top four producers, who he expects to deliberately ramp up production to push the price down and to, “knock the stuffing out of the new boys”.
Grigor foreshadows a similar situation occurring in the graphite market, which he described as the “least glamorous” of the three.
“If Syrah [Resources (ASX: SYR)] and Triton [Minerals (ASX: TON)] get up, there’s unlikely to be room for any others,” he said.
But he acknowledged that Syrah was in the most “treacherous” part of its life – the commissioning phase at Balama.
“The litmus test is fast approaching for Syrah,” he said.
Turning his attention to cobalt, Grigor said it would most likely gain support through any lack of new supply to the market.
“Cobalt is the most likely commodity to create a bubble, and it may not necessarily be short-term either,” he said.
He noted that there were few primary cobalt projects with many nickel and copper projects as a by-product.
“You’d need nickel to perform as well so you can forget that,” Grigor said, adding that low-grade copper projects wouldn’t get off the ground either.
“I think [Broken Hill developer] Cobalt Blue (ASX: COB) will be one of the frontrunners due to their large resource.”
As chairman of graphite explorer First Graphite, Grigor didn’t miss the chance to spruik its endeavours in working to produce graphene for use in supercapacitor batteries.
“They’ve been pedestrian performers and that’s because they’ve been based on activated carbon,” he said.
Adding that the new technology being developed at Swinburne University would “knock everyone else out of the park”.
“Don’t forget the goal posts will keep shifting in this field.”