“It would take much higher EV penetration rates to offset these surpluses and balance the market,” the bank added, projecting that battery electric vehicles would need to make up 31% of global sales in 2025, compared to the current 2%, to “clear the market.”

Morgan Stanley calculates that lithium carbonate prices could plunge to $7,332 per metric ton by 2021 and even towards its marginal cost of production of $7,030 per metric ton from the current $13,375 per metric ton.

Furthermore, the bank also downgraded its outlook on Albermarle and SQM, the two largest producers of lithium, to “underweight” from “equal weight.”

Albermarle is Global X Lithium & Battery Tech ETF’s top component holding at 17.5% of the ETF’s portfolio, and Sociedad Quimica Y Minera is 7.6% of the fund’s underlying weight.

Albermarle fell 7.4% and SQM declined 8.8% on Monday.

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