Following up to your recent post on Nickel strength, this article highlights the potential for major upcoming demand in the industrial metal and is potential good news for the related Sherritt & Norilsk shares noted in your post. 

Eoin Treacy's view

Thank you for this email which may be of interest to subscribers. Here is a section from the article:

“This means the supply of lithium, cobalt, nickel and manganese to produce the cathode for these cells, alongside graphite to produce battery anodes, needs to rapidly evolve for the 21st century," Moores testified.

Moores presented a chart based on the assumption that all of these megafactories are built and run at 100% capacity utilization.

"Under this scenario, lithium demand will increase by over eight times, graphite anode by over seven times, nickel by a massive 19 times, and cobalt demand will rise four-fold, which takes into account the industry trend of reducing cobalt usage in a battery," Moores testified.

The supply inelasticity meets rising demand argument for lithium was truly compelling in 2013 when the sector was just lifting off and there was no new supply planned. Since then there has been a great deal of investment in lithium and it is going to require the realisation of the most bullish forecasts to vindicate the decision to invest in new recovery operations.

Meanwhile the massive advance in cobalt prices last year did what big run-ups always do and encouraged consumers to find alternative sources of supply and more efficient uses of the commodity. Tesla rolled out 8:1:1 battery chemistries last year and the rest of the industry will be following this year. It’s the only battery on the market today that can achieve 300 miles ranges to the best of my knowledge.

We are at an interesting stage right now because the initial wave of EV enthusiasm has passed through the metals market. If all of the gigafactories under construction are in fact built and begin to supply batteries to the global market that is going to require a significant additional investment in new supply. With low prices for metals right now investors are probably in a “show me” mood and are probably waiting for proof prices can be sustained before committing capital. That is a condition for a new supply inelasticity argument but it is contingent on those factories coming on line which may take another year or two.