Gleneagle Securities Logo

Nickel and lithium prices suffer a drastic downturn

Why, and what does it mean? In the past year, the price of lithium has dropped by more than 80 percent. Meanwhile, nickel is down more than 40 percent. Both minerals are key components of electric vehicle (EV) batteries. The...
Trading Themes
3 Min Read

Why, and what does it mean?

In the past year, the price of lithium has dropped by more than 80 percent. Meanwhile, nickel is down more than 40 percent. Both minerals are key components of electric vehicle (EV) batteries.

The plummeting prices have pushed WA’s major industry players to mothball their mines, workers to lose jobs and the government to all but panic. Last week, the world’s largest lithium producer, Albemarle, said it would cut jobs and pause expansion at its Bunbury refinery in the south of WA to reduce costs and optimise cash flow.

In Australia

A growing number of Australians are “excited to get their hands on” an electric vehicle (EV) as sales surged across the country last year. EV sales more than doubled, with 87,217 vehicles sold in 2023, according to figures by the automotive industry’s lobby group, FCAI. This translates to 7.2 percent of the market, which is a jump from 3.1 percent of sales in 2022. Electric, hybrid and plug-in hybrid vehicles accounted for 196,868 sales overall, which is 16.2 percent of the market. Beyhad Jafari, the Electric Vehicle Council (EVC) chief executive, said the figures were promising.

Meanwhile, in the US

EV sales pace is running short of power going into 2024. Sales of battery-electric vehicles in the U.S. may have climbed above the 1 million unit mark in 2023, but there’s evidence they’re stalled at base camp rather than sprinting to new sales summits. The proof is a combination of hard numbers and harder decisions by some of the major automakers. Those decisions include General Motors Co. slowing plans for new EV introductions and delaying the rollout of a new generation Chevrolet Bolt EV and EUV until 2025 and Ford Motor Co. cutting production of its F-150 Lightning electric pickup truck by 50% at the start of 2024.

The perfect storm played out –

  • Destocking
  • Deceleration in EV demand
  • Sky High prices made projects that were not viable now viable. These plants came online quicker than expected.

Result: There is an oversupply.

The Future

The lithium and nickel markets are now working their way through previous excesses. As the capital cycle diagram above suggests, the end of a cycle is normally characterised by business investment declining, firms exiting, industry consolidation, and investors being pessimistic. That describes exactly what’s currently happening in these markets.

The industry is starting to get the attention of more fund managers. Tribeca’s Jun Bei Liu described lithium stocks as ‘interesting’ given recent developments of production cutbacks and consolidation. Other funds, such as Pella Asset Management, have recently invested in the sector. Pella believes that lithium demand will exceed supply by 2025 as EV sales grow and there’s a shift to larger EVs, while lithium supply may struggle to ramp back up.

Written by

Alastair Kennelly

Sources:

This is factual information only and is based partly on information obtained in good faith from third-party sources.  While this information is believed to be accurate and reliable at the time of publication, to the extent permitted by law, no liability is accepted for any loss or damage as a result of reliance upon it.

The information provided is of general nature only and does not take into account your personal objectives, financial situations or needs. Before acting on any information provided, you should consider whether the information is suitable for you and your personal circumstances and if necessary, seek appropriate professional advice. All opinions, conclusions, forecasts or recommendations are reasonably held at the time of compilation but are subject to change without notice. Investments can go up and down. Past performance is not necessarily indicative of future performance.

Alastair Kennelly
Guest Author
Alastair has worked in the Financial Services arena for over 17 years. His wealth of experience spans from large investment firms through to bespoke wealth management and personal advisory services.
More From Alastair
Trading Themes
The Income Strategy Investors love dividends. Many academics and financial professionals are not too...
GES-Icon-SandLight_RGB

Never Miss an Opportunity

Become a Gleneagle member and be the first to discover exclusive new investments and market insights

Receive the Latest

GES-Icon-SandLight_RGB

Sorry, this opportunity is now closed

Become a Gleneagle member to receive the latest opportunities as they open.