Czech battery metals under pressure: Goldman Sachs forecasts further price declines

According to US bank Goldman Sachs, a recovery in prices for battery materials is not yet on the horizon. Higher inventories and slower growth in electric vehicle sales could keep prices lower for longer. Analysts say prices of key metals could fall by 12 to 25 % over the next year. \n\nGoldman Sachs’ forecast focuses on metals such as copper, nickel, cobalt and lithium. The bank also warned traders against misreading current upward trends. Lithium and nickel prices have rebounded over the past week. Analysts say, however, that this was merely activity by traders covering their short positions.\n

“Despite the significant drop in battery metal prices, with nickel, lithium and cobalt down 60 %, 80 % and 65 % from their cycle peaks, we believe it is too early to call an end to these respective bear markets,” Goldman Sachs analysts wrote in a note to clients. “Margin pressures have led to a significant degree of supply rationing over the past quarter.”

\nLithium and nickel surpluses are expected to be substantial in 2024. According to the bank’s forecast, lithium markets will have a surplus of 150 000 tonnes this year and 336 000 tonnes in 2025. Slowing demand for cars in Western countries will also play a role. As a result of these factors, the bank currently forecasts declines over the next year of 12 % for cobalt, 15 % for nickel and 25 % for lithium carbonate.\n\nThis means Goldman Sachs expects cobalt to trade at 26 000 USD per tonne over the next 12 months, nickel to fall to 15 000 USD per tonne and lithium carbonate to drop to 10 000 USD per tonne.\n

Low metal prices mean lower costs for automakers

\nLithium carbonate prices in China traded at around 108 500 yuan (15 071 USD) on Tuesday. Nickel on the London Metal Exchange (LME) last traded at 17 945 USD per tonne on Tuesday, while cobalt on the LME stood at 28 550 USD per tonne.\n

Competitors share a similar outlook. “I’d say the outlook remains pretty bleak, particularly for lithium and nickel,” Tim Bush, an electric vehicle battery research analyst at UBS, said on CNBC in January this year. “That’s not necessarily a bad thing right now, because it means batteries will be cheaper for automakers, helping to ease the pain some US and European automakers are experiencing,” he added.

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The decline is long-term, and forecasts are uncertain

\nAnalysts have been pointing to the impact of high inventories on battery material prices for some time. Lithium prices, for example, have plunged by 85 % over the past year. Apart from a brief period between April and June 2023, they have been falling steadily since November 2022.\n\nIn a report published in June 2022, Goldman Sachs said it expected the upward trend in battery metal prices to have peaked. This was despite metals such as cobalt, lithium and nickel being set to power the green industrial revolution and facing a wave of demand comparable to that for copper and iron ore during China’s rapid growth in the 2000s.\n

“With climate change at the forefront, investors are fully aware that battery metals will play a key role in the 21st-century global economy, just as bulk and base metals did before them,” the report says.\n\n“Despite this exponential demand profile, Goldman Sachs Research considers the battery metals bull market to be over for now,” it adds.