Gerardo Del Real,
Editor
Nov. 24, 2022
I said it before and I’ll say it again: I love making money from Goldman Sachs being wrong.
For years the vampire squid has made it a habit of publishing a fear mongering report on imminent lithium oversupply, which it speculates will cause price drops in one of the world’s hottest commodities.
The most recent report from Goldman doubles down on its bearish (officially anyway) view and outlines why it “believes” that lithium supply will begin to outpace demand from 2023 onwards.
In the words of the great poet Shawn Carter, “pardon me I had to laugh at that”.
They even provided a chart. Scary huh?
The funny/not funny part is that lithium stocks sold off pretty significantly with some down as much as 12-15%.
The last selloff prompted by Goldman’s insights lasted a few months, which makes me question the analysts covering the space. But that’s another story for another day. Someone has to be wrong.
It’s worth noting that the last time Goldman tried playing boogeyman it forecasted a surplus only to revise that estimate five months later and admit there was an 84k tonne deficit.
This time around, the selloff lasted a whole day or so before reality kicked back in. You’re losing your mojo Goldman, but I digress.
A few days after the spooky report (yes I know halloween was a few weeks ago), Pilbara’s most recent spot spodumene auction achieved a record price of US$8,575 per dry metric ton (DMT) of 6% spodumene concentrate (SC6) in November. That’s record high prices.
Rodney Hooper of RK Equity Advisors broke down the report pretty efficiently, so I’ll cite the points he made which happen to echo my thoughts.
First off, lithium production does not equal battery grade supply. Seems obvious right?
The second point Mr. Hooper makes is that battery grade demand is substantially more than the Goldman forecast. How much more? Try 40,000 tonnes.
I know there’s an adderall shortage Goldman, but please, focus.
It’s November. You would think that part of the equation would be plugged into the model by now but what do I know?
Look at that chart again. Does anyone really think that output will double from 2021 to 2023?
At the end of the day you have to make your own decisions about how you allocate capital.
Look at the Goldman research, look at the Benchmark Mineral Intelligence numbers (a spectacular source for all things battery metals).
Consider the recent price action from the Pilbara auction, which came after the Goldman report and vote with your dollars.
Lithium remains the commodity I have the largest exposure to and it will remain that way for a while.
There’s a lot of money to be made in the space and that’s not changing anytime soon.
No matter what the squid says.
Check out our latest lithium research here for more on why the mainstream is wrong as well as one of the top lithium stocks you can buy now.
Gerardo Del Real
Editor, Daily Profit Cycle