Lithium and metal for batteries? We risk going from boom to crash
2021 and 2022 were record years for lithium, cobalt and nickel, essential metals in the production of electric car batteries and accumulators. However, we could be on the eve of a sharp decline in their prices.
Goldman analysts Nicholas Snowdon and Aditi Rai wrote in a note over the weekend: “ Investors are fully aware that battery metals will play a crucial role in the 21st century global economy. However, despite the exponential demand profile, we believe that the “bull” market for battery metals is over for now ”. An oversupply may be behind the end of the hikes.
According to analysts, there has been " a surge in investor capital in supply investments linked to the long-term EV demand history, essentially trading a spot commodity as a future-oriented stock ." " This fundamental valuation error has in turn generated an oversized supply response, well before the trend in demand ".
According to the report, Goldman expects a "sharp correction" in lithium prices. The company predicts that the average for lithium this year will be less than $ 54,000 per ton and that cobalt will drop to $ 59,500 per ton. To give an idea, at the end of May the price on the London commodity exchange stood at 76,000 at the end of May. An expected decline of over 20%.
The bank concluded that: “This oversupply phase will eventually sow the seeds of the battery materials super cycle in the second half of this decade. At that point, the increase in demand will more sustainably exceed the current growth in supply ". Exactly as happens in the oil market, where high prices cause excess investment on the one hand they lay the foundations for subsequent price reductions, on the other they destroy demand with excessive prices, activating a search for possible substitutes.
This spring, Chinese electric vehicle manufacturers were grappling with rising costs for all starting materials. A crisis that had taken the place of the previously present one of semiconductors. The electric car appears very fragile at the moment, from a cost point of view.
While some components have become unavailable, the raw materials for other components have skyrocketed. Cobalt, palladium and aluminum are also at very high prices.
Speaking of specific cases, the price increase is likely due to the fact that 40% of palladium production comes from Russia, Nikkei noted last week. This forced the car manufacturers to give up purchases from Russia and look for alternative sources, but these, once activated, add up to the previous ones and everything turns into an oversupply. In the end it is only a matter of time.
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The article Lithium and metal for batteries? We risk going from boom to crash comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/litio-e-metalli-per-batterie-rischiamo-di-passare-dal-boom-al-crash/ on Wed, 01 Jun 2022 09:12:18 +0000.