Allianz Trade: ‘Price fall in nickel and lithium hinder global energy transition’

The international insurance company Allianz Trade warns that the fall in prices of critical metals, such as lithium, cobalt, and nickel, is hindering the global energy transition. According to the credit insurer, price drops create uncertainty and deter investors in sustainable energy.

The postponement of investments is bad news for Europe. Brussels wants to catch up in extracting critical metals to reduce dependence on countries like China. However, the opposite happens. Just like with oil, dependence increases, making the EU vulnerable to manipulation and trade wars.

Essential for the energy transition

Lithium, cobalt, and nickel are essential for producing batteries, energy storage, electric vehicles, wind turbines, and solar panels. They are also crucial for a successful energy transition.

The demand for these metals is increasing enormously, and global climate goals are unattainable without critical metals. Therefore, you would expect prices to rise, but we are seeing sharp declines.

For example, lithium prices have fallen by 85 percent in the past eighteen months. An important cause is the sharp increase in supply, which has increased by 70 percent since 2021. That is good for consumers but not for investors who want to invest in new mines. Volatile prices and regulatory uncertainties deter them.

It’s all about timing

Research from Allianz Trade shows that exploration budgets for rare metal mining globally fell by -3% last year from a nine-year high in 2022 ($12.8 billion). Credit insurers do not expect these budgets to increase significantly in the short term.

The International Energy Agency (IEA) predicts that the demand for critical metals will increase significantly in the coming years, possibly doubling or tripling. But it’s all about timing. And for many investors, now is not the right time.