Higher EV prices scare away buyers. That delays the transition from gas-powered cars to electric cars, which means cars will wind up emitting more carbon dioxide. In other words, high metal prices aren’t just a drag on car companies’ profits; they also hinder efforts to keep global warming under 2°C and avoid the worst impacts of climate change.

But there’s a kernel of hope for the EV market. A Goldman Sachs research note published May 29 predicts battery metal prices will crash over the next two years. The Goldman analysts believe businesses are already building too many lithium, nickel, and cobalt mines, which will lead to an oversupply of the metals by 2023. (Businesses are also ramping up efforts to recycle the metals, but that’s still a negligible source of material compared to new mining.) Last year, the analysts estimate, the world produced 11% less lithium than it needed. But by 2025, newly-built mines will produce 23% more lithium than automakers and other businesses can use.

Goldman Sachs predicts the surplus will rein in the skyrocketing cost of battery metals. The analysts predict the annual average price of lithium will peak at about $54,000 per metric ton this year—nearly nine times higher than it was in 2020. But they believe the price will quickly drop to $11,000 per metric ton by 2024, which is (merely) double the 2020 price.

The rise and fall—and rise—of battery metal prices

Although Goldman Sachs predicts automakers will find some relief from metal shortages for the next few years, that respite probably won’t last. The global consumption of battery metals will only keep rising, the analysts predict, and by the end of the decade demand will catch up with supply and push prices up again.

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