First Berlin Equity Research has published a research update on European Lithium Limited (ISIN: AU000000EUR7). Analyst Simon Scholes reiterated his BUY rating and maintained his EUR 0.17 price target.

Pricing for lithium chemicals quadrupled during 2021/22 as worldwide sales of EVs tripled. Since early 2023 prices have collapsed by ca. 80% due to destocking at Chinese electric battery makers prompted by rising supply. However, as always in cyclical markets, the best cure for low prices?is low prices. New lithium projects base their funding on long term price expectations at the time of funding. Generally, long term price forecasts are influenced by prices at the time of funding because it is difficult for observers to detach themselves from current prices. This pattern of behaviour indicates that supply growth will moderate. First signs that this is indeed happening have come in recent days as lithium commodity prices have rallied on news that major miners are delaying planned capacity increases. Meanwhile, the consultant Benchmark Minerals Intelligence (BMI) sees global EV sales more than quadrupling from 13.8m units in 2023 to 59.1m in 2033 and expects the lithium market to be back in deficit from 2029 – the year we expect the Wolfsberg Lithium Project to reach full capacity. BMI further forecasts that the lithium market will remain in deficit into the early 2040s i.e. throughout the project’s lifetime. European Lithium (EUR) also has a 7.5% stake in the Tanbreez rare earths/rare metals project in Greenland, which in terms of in situ tonnage of rare earths oxides, is the largest such project in the world. It is likely that EUR/Critical Metals shareholders will have an opportunity to take a larger stake ahead of a planned 2025 Nasdaq listing of the project. We maintain our Buy recommendation for EUR with price targets of €0.17 and AUD0.28 (previously: €0.17 and AUD0.25).