This is an email I got a couple of days ago but held back hoping to buy low, obviously out of the bag.
From mid-2020 throughto early 2022, lithium miners have dominated in terms of share price gains. Atrend that has surged to life once more as the battery boom narrative grippedinvestors’ attention as Tesla grew, and grew, and grew.
Everyone understandsnow that electric vehicles (EVs) are here to stay.
In fact, we are at apivotal turning point in terms of user adoption. Carmakers worldwide arescrambling to ensure they have some sort of EV offering. A fact this is beingpushed by the ongoing transition away from the combustion engine — for betteror worse...
But I am not here toargue about whether the EV boom is good for society or not.
That is irrelevant atthis point because, like it or not, EVs are undeniably the future of the automotiveindustry. And savvy investors have been able to reap the reward of thismegatrend by betting big on the materials that will help usher in this future.
In other words,battery metal miners — but especially lithium stocks — have thrived.
The question oneveryone's mind is whether this success is sustainable.
After all,commodities are often subject to intense cycles...
Peaks and troughs
Three weeks ago, youmay recall that Goldman Sachs called an end to the battery metal boom. I eventalked about the situation and its potential ramifications here, if you need arefresher.
The point is that theinvestment bank has gone cold on battery metals.
In their view, thebig gains are now long gone. Instead, we are going to enter a phase where themarket begins to level out as new supply comes online to meet demand.
That is certainly apossibility, but it is by no means guaranteed.
In the weeks sincethis hit piece for example, lithium prices have remained fairly steady.Granted, that does not mean the situation cannot change, but it is an importantfirst step for battery metal believers.
On top of that, thegeopolitical landscape is still offering up a lot of potential too.
Last Tuesday, the USDepartment of State released details on one of its new policies. Known as theMinerals Security Partnership (MSP), it is just the latest tool in the ongoingstruggle to ensure there are critical mineral supply channels outside of China.
That is going to behuge for many of the upcoming battery metals producers. As the media releasenoted:
‘Demand for critical minerals, which areessential for clean energy and other technologies, projected to expandsignificantly in the coming decades. The MSP will help catalyse investment fromgovernments and the private sector for strategic opportunities — across thefull value chain — that adhere to the highest environmental, social, andgovernance standards.’
For Australia, whichis a key partner in this MSP program, this is a big win. You should expect tosee plenty of support from both the US and Australian governments in existingand new projects to help meet the needs of this partnership.
In other words,investors should be prepared for more incentives to come. A development thatreally puts a dampener on Goldman's more downbeat outlook.
This battery metalscycle may just be getting started...
(20min delay)