Supply chain disruptions could be exacerbated if Covid-19’s impact deepens in Japan and South Korea, where a lot of battery and car manufacturing takes place, said Andrew Miller, the product director at Benchmark Mineral Intelligence, a research firm. “As you saw with SARS, China is quite good at stepping up and correcting itself to get back under control, so it wouldn’t be a surprise if things subside in China…in Japan and Korea, you don’t have the same mechanisms,” he said.

But, while lithium miners might take a hit, there’s a chance coronavirus could actually help fix one of the biggest issues in the sector at large: lack of investment.

Since 2018, mining companies have produced more lithium than manufacturers need, which has hurt prices. Demand is set to skyrocket over the next decade, however, as the electric vehicle market explodes, and at current rates there’s no way production can keep up. And, with investors spooked over low prices, the investment needed to ramp up production has stalled.

Prices were already set to start creeping up this year, and coronavirus-related supply chain disruptions helped boost lithium hydroxide prices by more than 3% last month, even as the virus harms profits overall. A sustained climb in prices should encourage investors who were sitting on the sidelines, potentially unleashing the “herd behavior of the market” in full force, Hersh said. Oil and gas companies, in particular, have done due diligence on the sector and seem to be waiting for the right moment to dive in, she said.

There’s a big caveat, however, Hersh says. A serious slowdown leading to a recession in China would likely slow electric vehicle development, stymieing demand.

More existentially, China has bankrolled much of the sector’s development. If a more stagnant China puts less money into the sector, that would leave a huge gap for new funders to fill—but in the long-run could lead to a more robust market by cutting its reliance on Beijing. “The reality is that China is way ahead of the rest of world in the understanding and grasp of the need to move towards electrification,” Miller said. “Ultimately, that’s a big thing that will have to change.”

An earlier version of this article named the product director at Benchmark Mineral Intelligence as Andrew Wilson instead of Andrew Miller.

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