We’ve not held the lithium names, in our direct equity sleeves, viewing them as somewhat crazily overvalued.
Commodities often have fairly incredible price moves, given how sensitive price can be to supply surpluses/deficits. Lithium has proved no different, with the EV + battery boom.
In general, we’d thought that reserves would like grow, crunching returns for most players, and any normalisation in demand (even just cyclically, as cars are at the pointy end of the economic cycle) would have material impacts.
Given we’d “missed the boat” on the way up, we didn’t want to “catch the knife” on the way down.
We’d also felt that technological substitution was a real threat, and so it would appear to be.
Below is CATL’s announcement regarding their NA+ battery.
The product might only work for smaller cars (not giant SUV’s) and for electric bikes/scooters. It might have broader commercial application in stationary (as opposed to mobile, where size is crucial) storage, but the point is, lithium ion batters won’t be the only game in town.
So demand might be a little less, supply might be a little more, and ultimately, it makes guessing where lithium prices wind up almost impossible.
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