The bull market for some of the key battery metals is over, at least in the near term, after a jump in investment in supply ahead of the demand trend, according to Goldman Sachs.
Lithium, cobalt, and nickel—the metals crucial to advancing the energy transition—still face a supercycle ahead, but only after 2024. Before that, the prices of those key battery metals, especially lithium, are set for a “sharp correction,” the investment bank said in a note on Sunday carried by Bloomberg.
The long-term prospects for battery metals are still very bullish as governments push for greener power generation and transportation technologies. But this year and next, the prices of lithium, nickel, and cobalt are set to plunge from their recent highs, Goldman Sachs says.
“Yet despite this exponential demand profile, we see the battery metals bull market as over for now,” the bank’s analysts wrote in the note.
For lithium, Goldman Sachs sees prices averaging just $16,000 per ton in 2023, down from $54,000 per ton in 2022. Cobalt prices are expected at $59,500 a ton in 2023, down from around $80,000 now. The nickel prices are set to jump by 20 percent through the end of this year, to $36,500 per ton. However, “fundamental pressures” are likely to drag nickel prices down afterward, Goldman Sachs says.
After what the bank sees as a sharp correction later this year and next, the prices of the key battery metals are expected to soar again after 2024 and through the rest of this decade.
“This phase of oversupply will ultimately sow the seeds of the battery materials super cycle over the second half of this decade,” Goldman’s analysts said as carried by Bloomberg.
The skyrocketing prices of the key battery metals threaten to slow down the energy transition, analysts and organizations say. Demand for lithium, cobalt, nickel, copper, aluminum, and other key metals has surged as almost every carmaker in the world has pledged billions of U.S. dollars in investment in electric vehicles, while governments are pushing for—and subsidizing—a rise in renewable power generation.
For example, global sales of EVs surged last year and have continued to grow strongly this year, but soaring prices of critical minerals and supply chain bottlenecks are the greatest obstacles to a continued surge in EV sales in the short term, the International Energy Agency (IEA) said in its Global EV Outlook 2022 published earlier this month.
Global EV sales broke all records last year and continued their strong performance in the first quarter of 2022, mostly thanks to sustained policy support in many markets, with overall public spending on subsidies and incentives doubling in 2021 to nearly $30 billion, the IEA said in the annual report.
Sales of fully electric and plug-in hybrid vehicles doubled in 2021 from 2020 to a new annual record of 6.6 million. Last year, more than 120,000 electric cars were sold each week globally, while back in 2012, a total of 120,000 EVs were sold for the entire year, the IEA said.
The agency, however, warned that “In the short term, the greatest obstacles to continued strong EV sales are soaring prices for some critical minerals essential for battery manufacturing, as well as supply chain disruptions caused by Russia’s attack on Ukraine and by continued Covid-19 lockdowns in some parts of China.”
Moreover, investors have been reluctant to invest in the metals mining industry, seeing it as one of the most carbon-intensive sectors. But key energy transition metals need trillions of U.S. dollars in investment if the world has any chance of advancing the transition to meet the Paris Agreement targets. Until other forms of totally clean energy become available—if ever—metals and metal mining will power the energy transition.
By Tsvetana Paraskova for Oilprice.com
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