The term battery metals typically refers to lithium, nickel, and cobalt. The name stems from the fact that the three metals are frequently used in the production of all types of modern batteries. Since 2021, these metals have enjoyed a rather lengthy bull run. This has proved profitable for investors and provided some much-needed predictability for traders.
However, if you ask the experts at Goldman Sachs, the battery metals party is “officially over.” But is this really true? If so, what does it mean for the rest of 2022?
Are Battery Metals Really Done For?
Cobalt saw its last major surge back in March of 2018, when it reached an all-time high of $94,000 a ton. Though they seemed on pace to recapture that same magic, Cobalt prices are now declining from their April heights of $79k. Lithium, meanwhile, has just started retreating after hitting nearly $50k/ton in March. Even so, they stand fairly tall at around $46,000. Nickel prices are hardly determined by technology alone, but they have still spent the last week or so searching for a solid bottom.
But here’s the thing about Goldman Sachs’ recent proclamation: it’s incredibly early, and it doesn’t really consider the facts. If you read any of the articles on the matter, you’ll note that the organization has largely hinged their prediction on supply issues. In their words, the lack of a healthy supply chain will cause “a multi-year softening path for fundamentals,” triggering a sustained surplus and, therefore, a drop in prices. And while they make allotments for demand, it’s entirely possible they aren’t making enough.
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The Real Supply Issue at Work is Oil
Gas prices are predicted to reach $6.00 a gallon across the US by early summer, one of the busiest traveling times of the year. And though the numbers are still out for 2022, EV sales grew by 85% from 2020 to 2021. You might recognize that this was smack dab in the middle of the pandemic.
Now, with oil surging due to the war in Ukraine and other factors, you can expect more and more Americans (and Europeans) to throw in the towel and go electric. If this happens, GS’s prediction for EV demand is going to fall way short of reality. Of course, the more EVs and hybrids you sell, the more batteries you’re going to need.
While far from a forgone conclusion, this is still a perfectly reasonable scenario. If Russia’s war continues and oil supplies don’t get a significant boost, we might only be looking at a “brief pause” in the battery metals gold rush.
One thing’s for sure: other companies are betting against Goldman Sach’s claims. Just this past Friday. Chevy reduced the price of the 2023 model Bolt to just $26,595, making it the cheapest electric vehicle in history.
As EVs become more affordable (and more tempting), you’re going to see some major shifts across multiple commodities. What matters now is ensuring you’re on the right side of those moves.
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