Commodity Call: lithium supply risks mount

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Resource nationalism is a growing headwind for the supply of critical minerals and could limit the pace of the world’s transition to lower-emitting energy. After an unprecedented rise in the price of lithium over the past two years, prices are down nearly 75% this year from a recent record high. Softening growth in sales of electric vehicles (EV) in China was the main catalyst, exacerbated by concerns around a new wave of supply. These concerns may be unwarranted. Chile, holder of the world’s largest reserves, has a new policy requiring state involvement for all new lithium projects and the use of environmentally friendly processing that is still unproven on a commercial scale.This could delay the delivery of its pipeline of projects.Other producers also have their issues. Increasing resource nationalism, particularly in Africa could limit growth in supply. The outlook for the EV sector remains strong. We expect these latest supply side issues to reignite supply concerns, leading to a rebound in prices. Chart of the week Chile’s lithium supply at risk amid new mining policy