Goldman Sachs says battery metal bull market is over – at least until 2024
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Goldman Sachs says the price of three key battery metals — cobalt, lithium and nickel — will drop over the next two years after investors wanting exposure to the green-energy transition piled in too quickly.
“Investors are fully aware that battery metals will play a crucial role in the 21st century global economy,” Goldman analysts Nicholas Snowdon and Aditi Rai said in a note over the weekend.
“Yet despite this exponential demand profile, we see the battery metals bull market as over for now.”
While the long-term prospects for the battery metals remains strong due to the rapid uptake of electric vehicles (EVs), investor enthusiasm has led to an oversupply.
There’s been “a surge in investor capital into supply investment tied to the long term EV demand story, essentially trading a spot-driven commodity as a forward-looking equity,” the analysts said.
“That fundamental mispricing has in turn generated an outsized supply response well ahead of the demand trend.”
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The Wall Street bank said there will be a “sharp correction” in lithium prices, with the metal averaging under $54,000 a tonne this year, down from a spot price of over $60,000.
It’s expected to fall further to an average of just over $16,000 in 2023.
Cobalt will probably drop to an average of $59,500 a tonne next year from roughly $80,000 now.
And nickel is likely to rise almost 20% over the rest of this year to $36,500 a tonne before “fundamental pressures” drive it lower again.
Benchmark Minerals Intelligence agrees, flagging that buyers in Europe and North America are employing a watch-and-wait strategy for spot market purchasing in response to recent bearish developments in China – subsequently limiting international market activity and softening spot prices marginally to between $65,000-75,000/tonne for both carbonate and hydroxide.
But Goldman Sachs did highlight that prices could soar again after 2024.
“This phase of oversupply will ultimately sow the seeds of the battery materials super cycle over the second half of this decade,” they said.
Then “the demand surge will more sustainably overcome current supply growth.”
S&P Global Market Intelligence expects lithium raw material supply is likely to improve especially from the September quarter onward, when the bulk of this year’s new additions is scheduled to reach the market.
The visible lithium supply pipeline could be sufficient to meet demand in 2023.
The lithium market is likely to return to a deficit from 2024, which is forecast to deepen over 2024-26, as demand growth once again outpaces that of supply.