Battery Metals

Beginning of the end for battery metals bull market: Goldmans

Fri 03 Jun 22, 1:01pm (AEST)
image

Commodities in article

Share article

Key Points

  • Goldmans see prices on a downward trajectory over the course of the next two years
  • All three metals to shift into sustained surplus over the next 1-2 years
  • Battery demand from energy storage and EVs will grow ten-fold to 3453GWh by 2030

Following on from negative reports on the outlook for lithium last week, which saw prices tumble, Goldman Sachs believes it’s the beginning of the end for the battery metals bull market.

To the uninitiated, battery metals which include cobalt, lithium and nickel are expected to power the green industrial revolution.

Unless you’ve been living in a cave, you will know that these battery metals are currently facing a wave of demand comparable to that of copper and iron ore during China’s rapid growth in the 2000’s.

image

Bull is now over

But despite the exponential demand profile they’ve enjoyed up until now, the broker claims the battery metals bull market is over for now.

Goldmans believes a fundamental mispricing experienced by new ‘economy’ commodities has in turn generated an outsized supply response well ahead of the demand trend in focus.

As a case in point, Goldmans analysts expect production to grow even faster than demand during the next three years: with the supply of lithium increasing 33% annually on average (year-over-year), while cobalt will grow 14% and nickel 8%.

The point to note is that demand for those metals, is only forecast to increase 27%, 11% and 7%, respectively.

image

Prices down

Based on this outlook, Goldmans see prices on a downward trajectory over the course of the next two years, including:

  • A sharp correction in lithium (spot $60,350/t versus Goldman Sachs average 2022 $53,982/t and 2023 $16,372/t)

  • Cobalt (spot $87,100/t, Goldman Sachs 2022 average $78,500/t and 2023 $59,500/t)

  • Nickel’s price profile is flatter versus spot (Goldman Sachs 2022 average $31,000/t and 2023 $30,250/t).

The broker expects a rally in the price over the rest of 2022 to $36,500/t, with fundamental pressures then driving a correction lower.

Softer fundamentals

While Goldman expects strong demand trends to continue, the broker foresees a set of emerging more significant supply responses across the battery metals triggering a multi-year softening path for fundamentals.

As a result, all three metals to shift into sustained surplus over the next 1-2 years (see table below), which means materially lower price levels.

image

All is not lost

There is a silver lining at the end of Goldmans analysis with the broker concluding that the oversupply of battery metals won’t last forever.

The bottom-line, concludes Goldmans is that the demand for these elements will continue to be underscored by a rapidly developing market for electric vehicles and green energy policy incentives.

“It is important to note that this phase of oversupply will ultimately sow the seeds of the battery materials super cycle over the second half of this decade, in our view, where the demand surge will more sustainably overcome current supply growth,” the broker notes.

Goldmans estimates show that the battery demand from energy storage and EVs will grow ten-fold to 3453GWh by 2030, from just 348GWh in 2021.

 

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

Get the latest news and media direct to your inbox

Sign up FREE