The price of lithium hit a two-year high earlier this month as demand for the rare earth element continues to surge, and Viriathus Australia’s managing director Shaun Cartwright is reaping the benefits.

Speaking to Reach Markets, Mr Cartwright said he and his team have been making a conscious effort to invest into the commodity – a key ingredient for batteries and electric vehicle (EV) drive trains – for several years.

He’s not alone. Growing demand for the rare earth element pushed the Benchmark Lithium Price Index up14.4% in February – breaking the record set in January 2021 to claim the title of ‘largest one-month gain’.

But a few years ago the story was different; research house Morgan Stanley issued a warning the market was about to go into oversupply, and expected prices to peak in 2018 at USD $13,000 per tonne before falling to USD $7000 by 2021.

Their research, Mr Cartwright said, cited battery and electric vehicle manufacturers (key users of lithium) shutting down their projects, clearly disinterested in this market.

But Mr Cartwright’s own internal research (including speaking with battery and electric vehicle manufacturers) found the market was far from hitting oversupply, instead the opposite appeared to be true.

“There actually wasn’t enough lithium being produced to be able to allow the battery makers to continue working on their projects so they just took projects off-line,” he said.

And earlier this month, the lithium price hit USD $12,600 per tonne (its highest level since March 2019) after rallying 88% since the start of the calendar year.

Research is key

Mr Cartwright said the rumblings in lithium markets over the past few years provide a good example of why he and his team like to take a research-driven, top-down approach to stock selection.

“We use our own internal research capabilities to identify equities that we want to be invested in,” he said.

“Once we’ve identified those companies we’ll use technical analysis to time our entry point, and we invest for the long term.

“We’re not looking to trade in and out of stocks, we’re looking to get set in opportunities that we really like for an extended period of time.”

Looking forward, Mr Cartwright’s research points to a positive year for equity investors. He noted that while there are still challenges facing businesses, most (if not all) appear to come with ready-made solutions.

The end of JobKeeper payments, for example, will likely be offset to changes to responsible lending laws designed to give Australians access to easier to obtain credit.

Shaun Cartwright will be joining us for ‘The Insider: Meet the Fund Manager’ on Friday 26 March at 12 pm where he will provide an overview of market themes, trends and insights, followed by an interactive Q&A. Book here.

‘The Insider: Meet the Fund Manager’ is a free webcast series which gives you direct access to prominent fund managers. This session is live and interactive and includes a live Q&A. Spots are limited, so please book into this session as soon as possible.

Past performance is not a reliable indicator of future performance.

Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.

Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you. The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.

Sources:

• Lithium prices continue to soar – up 88% in 2021
• Money flows into lithium stocks as demand drives prices up 68pc in 2021
• Morgan Stanley got it wrong on lithium over-supply, says this mining boss