The Nasdaq Sprott Energy Transition Materials™ Index1 rose 9.73% in June. At the end of May, there was a mini-selloff across most commodities and commodity-related equities due to disappointing economic data from China and concerns about a possible U.S. recession. By June 30, the market began to price in a more optimistic outlook, including the likelihood of stimulus in China in response to its weak economic data and the fading probability of a U.S. recession. The Index is up 3.
Over the past few years, the automotive industry has invested billions of dollars in establishing new EV and battery manufacturing facilities throughout North America. Now, automakers and battery suppliers can receive federal loans and tax credits worth billions of dollars to offset the associated costs and encourage further investment. This support will likely be instrumental in driving the industry forward.
EV batteries have emerged as the"new oil" . A resilient supply chain for critical minerals and EV components is needed to achieve energy independence . Recognizing this, the U.S. has initiated and invoked various measures and acts to promote domestic mining and processing of critical minerals. However, there are still significant gaps in the supply chain, particularly in producing EV battery cathodes and anodes.
The U.S. aims for EVs to account for half of all cars sold by 2030. However, current manufacturing capacity in the U.S. is only about 5% to 10% of what is needed to meet this target. To bridge this gap, the U.S. government has incentivized foreign companies to build refining and manufacturing capacity within the U.S., marking a direct intervention into building a heavy industry from scratch.
At the start of the year, when the lithium spot price declined from its all-time high, EV sales were weak as China ended its decade-long EV subsidy at the end of 2022. This past month, China released a 520-billion-yuan package of tax breaks over four years for electric vehicles.18 These tax breaks, as much as ~$4,000 per EV, have helped improve market sentiment and inventory restocking.
Source: News Formal (newsformal.com)
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