Goldman Sachs says the top is in for lithium: Pilbara Minerals, Allkem sell off

Goldman Sachs called a top for battery metals on Monday, with the view that cobalt, lithium and nickel prices will fall over the next two years.

According to Bloomberg, Goldman analysts have observed a surge in capital into supply-side investment, tied to the long-term EV adoption narrative. The hype has shifted battery metals from a once “spot drive commodity” to now a “forward-looking equity”. 

“That fundamental mispricing has in turn generated an outsized supply response well ahead of the demand trend.”

Goldman forecasts a “sharp correction” for lithium, expecting prices to average around US$54,000 a tonne in 22022, before rolling over to just US$16,000 in 2023.

Long-term demand for lithium is expected to remain strong, with a potential bull-market from 2024 as prices bottom and supply normalises. 

Credit Suisse also came forth with a similar view on Tuesday, but instead, expects a surplus in lithium supply around 2025. 

The investment bank also downgraded ASX-listed giants Pilbara Minerals (ASX: PLS) and Allkem (ASX: AKE) to a Neutral rating. Both stocks are down more than -9% in early trade.

Green metals under pressure

The S&P/ASX 200 is up 0.2% in early trade, but hardly reflective of the risk-side of town.

It's a sea of red for green metal stocks including lithium, cobalt, nickel and uranium, most of which are down between -2-10%.

This selloff hasn't come out of nowhere as most US sectors were sold down overnight. Bond yields have been slowly creeping up, which pressures secular growth stocks and risky assets.

Pilbara Minerals price chart (Source: TradingView)