Tomorrow Investor

Goldman Forecast on Lithium Prompts Industry Backlash


The Goldman Sachs Group’s most recent commodities report has set off a furor within the lithium mining community. The bank’s controversial statement opines that the current lithium price spike will end within the year and go into reverse.

This sentiment was echoed by the Credit Suisse Group AG, whose analysts also predicted a correction in market prices for the mineral.

However, mining industry specialists have decried the prediction, particularly those of London’s Benchmark Mineral Intelligence. According to Benchmark analysts, there is no truth to Goldman Sachs’ statement that there will be an increase in market supply as lithium refineries step up their production, resulting in much lower prices for the mineral.

While the Benchmark team agrees that lithium prices will be reduced, it doubts if this will be substantial in any way or if this will be reflected in the global market any time soon. 

For one thing, the lithium mining sector continues to struggle to attain its current production targets; for another, speeding up the lithium production process is out of the question as it involves highly complex methods that need to be stringently followed.

Likewise, Benchmark’s senior price analyst Daisy Jennings-Gray reminds industry watchers that, technically, lithium isn’t considered a commodity but a specialty chemical or material.

Not a Small Spat

Those who aren’t part of this dispute may see it as trivial. Still, given how vital lithium has become in light of the global push towards clean and renewable energy, the stakes are high for everyone involved.

Peter Hannah, senior price development manager for industrial consultancy Fastmarkets, opines that the relative newness of the lithium industry makes it hard to speak confidently regarding how mining companies will respond to the demand for increased supplies of the material. He added that increased production is dependent on technological innovation – and many possible solutions have yet to be manufactured for the industry. There are also too many variables to consider, each of which could prove analysts and miners wrong in several ways.

For now, automotive manufacturing margins may collapse if the lack of lithium is not promptly addressed and prices continue to soar. This will have the additional consequence of a slower roll-out for the electric vehicle industry. 

However, a sudden drop in prices will have its own issues. Mining companies could give up on new initiatives, which may lead to higher prices and an even greater lack of the element by the next decade. This would be possible given how most nations are bent on reducing the number of fossil fuel-reliant vehicles to meet their carbon neutrality targets.

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