The Mineral Resources Limited (ASX: MIN) share price has started the week in a positive fashion.
At one stage today, the mining and mining services company’s shares were up almost 5% to $41.68.
The Mineral Resources share price has pulled back a touch since then but remains up 3% to $40.99 currently.
Why is the Mineral Resources share price charging higher?
The catalyst for the rise in the Mineral Resources share price appears to be the increasingly favourable outlook for lithium prices.
Mineral Resources has exposure to lithium through its Mt Marion Lithium project, which it jointly owns with Jiangxi Ganfeng Lithium, and its Wodgina Lithium project. Wodgina is one of the largest known hard rock lithium deposits in the world with an estimated production life of over 30 years.
According to a report by GlobalData, courtesy of Forbes, there are concerns over lithium shortages due to growing demand for the white metal from the electric vehicle (EV) market.
While this is expected to stifle EV adoption, it is also expected to support higher lithium prices.
The GlobalData report says: “With lithium prices set to rise throughout the next decade, the EV sector in the West will have to face rising battery costs. If they pass costs on to the consumer, EV adoption will likely accelerate at a slower rate than previously expected.”
GlobalData analyst, Daniel Clarke, commented: “The rising price of lithium demonstrates what many in the industry have warned about for some time: the growing divergence between supply and demand for lithium.”
It isn’t just GlobalData that expects demand to increase. The International Energy Agency (IEA) has suggested that the growth in EVs could see lithium demand increase significantly times by 2030. The report notes that last year lithium demand was about 320,000 tonnes and is expected to hit 1 million by 2025 and 3 million by 2030.
All in all, this leaves companies like Mineral Resources well-placed to benefit greatly from the strong demand over the remainder of the decade.
The post Why the Mineral Resources (ASX:MIN) share price is storming higher appeared first on The Motley Fool Australia.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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