Battery metals bull market over for now, says Goldman Sachs

Goldman Sachs has published a research note suggesting that the high price environment for the battery metals lithium, cobalt and nickel will soon come to an end, followed by a ‘sharp correction’ in the space.

While the investment bank sees long term prospects for the battery metals remaining strong due to ongoing demand associated with the green energy transition, it predicts falling prices over the next two years after a ‘surge in investor capital into supply investment tied to the long term EV demand story’.

“Investors are fully aware that battery metals will play a crucial role in the 21st century global economy,” Goldman analysts including Nicholas Snowdon and Aditi Rai said in the note. “Yet despite this exponential demand profile, we see the battery metals bull market as over for now.”

The significant ‘green capex’ flows in the sector has led to a spot driven commodity being traded 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.”

Lithium prices will average under US$54,000 per tonne this year, down from a spot price of over $60,000, according to the Wall Street bank. It will fall further to an average of just over $16,000 in 2023.

Cobalt will likely drop to an average of $59,500 a tonne next year from roughly $80,000 now, while nickel could rise almost 20% over the rest of this year to $36,500 a tonne before ‘fundamental pressures’ drive it lower again, the report said.

Still, prices could soar again after 2024: “This phase of oversupply will ultimately sow the seeds of the battery materials supercycle over the second half of this decade,” Goldman said. Then, ‘the demand surge will more sustainably overcome current supply growth’.