Lithium to Find Balance Between Spot and Contract Pricing

Chris Berry: Lithium to Find Balance Between Spot and Contract

High lithium prices have turned many investors towards the battery metals sector, with the long-term outlook for the metal used to power electric vehicles remaining as strong as ever in coming years.

How high prices could go is uncertain, with some predicting a crash and others believing the peak has yet to come.

“Never in my wildest dreams would I have thought we would see US$70,000 (per tonne) spot lithium prices, so I’m very happy to see it. I think there are a number of reasons behind it, whether or not it’s speculation, stockpiling and, of course, just outrageous demand in China,” Chris Berry of House Mountain Partners told the Investing News Network at this year’s Fastmarkets Lithium Supply and Raw Materials conference.

“But I don’t have much of a feeling for if we go to US$100,000, or wherever we go,” he said. “I’m just a lot more focused on when this cycle gets a little bit long in the tooth, and when we mean revert, where do we land?”

The disconnect between lithium prices and the stock market is currently evident, as macroeconomic factors, as well as some bearish reports from investment banks, have hit the lithium space recently.

“With respect to the disconnect, I think that we all know in this game that as the commodity price takes off, the equities follow suit,” Berry said. “It’s no surprise, in my view, to see the equities kind of take a breather.”

Berry also shared his thoughts on the regionalization of supply chains, a trend accelerated by COVID-19, and how governments are waking up to the vulnerabilities they face going forward.

“I think it’s going to be a much more regionalized structure, but I think it’s going to take 10 years minimum,” Berry said. “So I do worry about the political will to see some of this through. But I think it’s going to happen.”

Listen to the interview above for more of Berry’s thoughts on how macroeconomics are hitting the lithium space, how to invest in a season of volatility and what he expects to see from now until 2025. You can also click here for the Investing News Network’s full playlist from the event on YouTube.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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