Howard Klein, founder of RK Equity and an established authority on the lithium market, marks a major milestone with the 100th edition of his Lithium-ion Bull newsletter. The landmark issue, titled It’s a Long Way to the Top (If You Wanna Rock and Roll), offers a masterclass in lithium market dynamics, blending past lessons, present challenges, and future opportunities. A decade and a half of lithium market expertise positions Klein as a unique voice in the energy transition conversation.
Klein’s analysis, rooted in rigorous research and delivered with his trademark wit, pulls no punches. As lithium emerges as a critical enabler of the electric vehicle (EV) revolution and energy storage, the newsletter explores the market’s volatility, structural challenges, and untapped potential. For those navigating the lithium landscape, this issue serves as an indispensable guide.
Howard Klein, RK Equity
A Volatile Decade: Lithium’s Highway to Hell
The past two years have been tumultuous for the lithium market. Prices for lithium carbonate have dropped precipitously from their 2022 highs, plunging to around $10,000 per tonne by the close of 2024. This level leaves more than half of global producers unprofitable, forcing idled capacity and delaying new project development. Equities in the sector have fared no better, with major players like Albemarle, SQM, and Ganfeng losing 70-80% of their value. Juniors, such as Sayona Mining and Piedmont Lithium, saw even steeper declines, with their valuations down over 90%.
Klein describes the lithium market as a rollercoaster ride, with immense price volatility. Yet, he remains cautiously optimistic. “Lithium is not for the faint of heart. The market is volatile, but the long-term structural demand story remains intact,” he explains. Klein predicts a recovery, forecasting prices rebounding to $15,000–$20,000 within the next two years, with the potential for short-term spikes above $30,000 as deficits emerge.
The New Lithium Order: China’s Dominance
One of the most critical shifts in the lithium landscape has been the rise of Chinese dominance. CATL and BYD, China’s battery giants, control over 50% of the global battery market, giving them outsized influence on lithium pricing and supply chain dynamics. Through vertical integration and aggressive cost strategies, CATL has become a price-setter, with CEO Robin Zeng admitting to using market power to slash costs while idling production to drive prices lower.
Klein points out that while this strategy has enabled CATL to reduce battery costs below $100 per kilowatt-hour—a long-standing industry benchmark—it has wreaked havoc on lithium suppliers globally. More than half of lithium producers are operating at a loss at current prices, with many scaling back operations or delaying new capacity.
Yet, Klein sees an eventual recalibration. “China’s dominance is real, but the lithium market cannot sustain this imbalance. Prices will have to rise to ensure the viability of the supply chain,” he asserts.
Geopolitical Shifts and Washington AC/DC
Klein explores the political undercurrents shaping the lithium market. He characterises the Musk-Trump administration, which he dubs “Washington AC/DC,” as a mix of deregulation, industrial policy, and entrepreneurial ambition. While President Musk champions innovation and manufacturing, Vice President Trump’s influence leans towards traditional energy policies, creating a complex backdrop for lithium’s future.
Despite this dichotomy, Klein highlights significant progress in domesticising lithium supply chains. The U.S. government has committed billions to projects like Lithium Americas’ Thacker Pass ($2.3 billion in loans) and Ioneer’s Rhyolite Ridge ($1 billion). Tesla’s efforts to localise production, exemplified by its Corpus Christi hydroxide plant, further reinforce this trend.
Europe, too, is stepping up. Projects like AMG’s German hydroxide plant and Sibanye Stillwater’s Keliber mine in Finland have received substantial funding, reflecting a broader commitment to securing non-Chinese lithium supply chains.
Lithium’s Darwinian Landscape: Survival of the Fittest
Klein offers a sobering view of lithium’s supply dynamics, describing the market as Darwinian. SQM, the world’s largest lithium producer, has pursued a “commodity carbonate” strategy, ramping up production in Chile’s Atacama Desert. This approach prioritises market share over profitability, exacerbating price declines. Meanwhile, CATL’s vertical integration and aggressive pricing strategies have created an oligopsony, where a few large buyers dictate terms to the broader market.
The result is a fragile supply chain, with over 50% of global production operating at a loss. However, Klein believes this pain is temporary. With global lithium demand projected to grow from 1.2 million tonnes in 2024 to 3 million tonnes by 2030, new capacity is urgently needed. “The industry must bring on an additional one million tonnes of supply by 2030 to meet demand. This requires investment now,” he stresses.
Opportunities in Chaos: Strategic Growth Areas
Despite the challenges, Klein identifies several areas of opportunity for investors and stakeholders in the lithium market:
- Emerging Markets: Lithium assets in Brazil, Canada, and Africa remain undervalued relative to Australian projects. These regions are likely to attract increased investment, with significant potential for upside.
- Technological Innovations: Direct Lithium Extraction (DLE) is a promising frontier, with ExxonMobil and Energy Source Minerals exploring unconventional sources like oilfields and geothermal brines.
- Strategic Consolidation: Mergers and acquisitions are expected to accelerate, particularly as major players like Rio Tinto and Albemarle seek to expand their portfolios. Klein anticipates increased activity in North America and Europe.
Rio Tinto’s Big Bet on Lithium
Rio Tinto’s $10 billion investment in lithium signals a bullish outlook for the commodity. The mining giant has positioned lithium as a core pillar of its future portfolio, potentially accounting for 13% of its business by 2030. Projects like the Rincon lithium brine operation in Argentina and Arcadium in Quebec underscore Rio’s commitment to building a diversified lithium portfolio.
Klein sees Rio’s move as a validation of lithium’s long-term potential. “Rio’s investment is a bet on the future. It’s a recognition that lithium is not just a niche commodity but a cornerstone of the energy transition,” he explains.
The Road Ahead: Back in Black by 2025/26?
Klein concludes his analysis with cautious optimism. While lithium equities are down significantly from their all-time highs, he believes the structural drivers of the market—rising EV adoption, energy storage demand, and geopolitical urgency—point to a strong recovery. He predicts that prices will stabilise and even rise by 2025/26 as supply deficits emerge and demand continues to grow.
For investors, Klein advises a diversified approach. “Trying to pick bottoms often results in smelly fingers. But a basket of lithium equities with a three-to-five-year horizon could yield significant returns,” he says.
Howard Klein’s 100th edition of Lithium-ion Bull offers a comprehensive and insightful analysis of the lithium market. His reflections blend deep industry expertise with a forward-looking perspective, making this issue an essential read for anyone involved in the sector. With lithium poised to play a central role in the energy transition, the journey ahead promises both challenges and rewards.
For a deeper dive into the lithium market and to access the full report, visit RK Equity. As Klein aptly puts it, “It’s a long way to the top, but if you want to rock and roll, don’t bet against Elon.”
To read the full report, go to www.rkequity.com
