Electric Vehicles
Lithium prices have collapsed by nearly 90% from the late-2022 peak.
How will lithium markets evolve from here?
In this report, we explore the cyclical and structural outlook for supply, demand, and prices.
We conclude that prices are likely to remain contained over the coming 12 to 18 months before facing upside pressure later this decade.
Western policymakers are pursuing three capital “T” Truths: China is evil, climate change is a major risk, and Russia is… also evil. Pursuing all three priorities at the same time presents a version of the classic “impossible trinity.”
The consensus soft-landing narrative is wrong. The US will fall into a recession in late 2024 or early 2025. We were tactically bullish on stocks most of last year, turned neutral earlier this year, and are going underweight today. We conservatively expect the S&P 500 to drop to 3750 during the coming recession.
The EU's import tariff increases on Chinese EVs are expected to have a minimal impact on China's overall exports. We anticipate that most Western-brand EV shipments from China will be less affected by the EU import tax hike. Beijing will likely pursue continued negotiations with the EU rather than resort to harsh retaliatory measures.
China is trying to export its way out of its economic slowdown while the US has already formed a hawkish consensus on foreign policy and trade. Investors should take cover as global financial markets are underrating the new phase of the trade war, which will escalate from here.
AI, EVs, and reshoring will lead to a massive surge in demand for electricity. Carbon-free, cheap, baseload nuclear energy stands to greatly benefit from these megatrends going forward.
The soft landing and rate cuts narrative is being priced out, and the S&P 500 is overvalued and getting overbought. The Magnificent Seven are about to get a new moniker on the back of performance dispersion. However, without the cohort, S&P 500 earnings would have been even deeper in the red.
The expectation that China is best placed to win the global EV race presumes the persistence of the status quo. Reality, however, may differ as the sector looks set to be hit by a range of changes. If nonlinearity were to emerge in the global auto sector, as it often does, then the EV transition could end up spawning a very unexpected list of winners and losers.
China’s push to dramatically expand its copper-refining capacity will be complemented by further vertical integration of mining assets. However, surplus refining capacity will push treatment and refining charges lower in the short run. The threat of EU tariffs on Chinese EV imports looms large, and could be costly to China’s expansion of its already-dominant supply-chain ecosystem for EVs and metals refining. We remain long the XME and COMT ETFs to retain exposure to metals miners and refiners.