about 2 months ago • 2 mins
It’s been a rocky year for metal. Lithium prices have slid by nearly 70%, nickel prices have tumbled by 40%, and cobalt prices have been stuck just above their all-time lows. Much of the fall in these key battery metals has been driven by a surge in supply at a time when demand for fully electric cars in China (i.e. the world’s biggest EV market) is slowing. Sales rose by 100% in the first nine months of 2022 over the same period the previous year, but that growth slowed to just 25% this year. Meanwhile, sales of consumer electronics in China are on track for a second consecutive year of double-digit percentage drops. Taken together, that means the lithium, nickel, and cobalt markets are expected to be oversupplied until 2028, according to consultancy CRU Group.
The price drops reverse some of the huge gains made in 2021 and 2022, when hype supercharged the battery metals market. And that return back to earth will come as a sweet relief to car companies and battery manufacturers that suffered an increase in cell prices last year for the first time in well over a decade. What’s more, the fall in input prices could help reduce the cost of EVs, since the battery itself accounts for somewhere between one-fifth and one-third of the price of the car. However, raw material price drops can take months to feed through, depending on the contract terms between miners and their customers.
If you’re looking for winners in all this, I see two with potential. First, consumers, who could see EVs become a bit less expensive. Second, the firms that build and operate EV charging stations: as sticker prices come down, EV adoption will accelerate even more, and that’ll mean we’ll need more of those. So that may be where the real long-term investment opportunity lies. However, you might want to proceed with caution here: very few of these firms (like Kempower and Alfen) are currently profitable.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.
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