The IGO Ltd (ASX: IGO) share price is having a terrible start to the month.
In afternoon trade, the battery materials miner's shares are down 13% to $11.00.
Why is the IGO share price crumbling?
Investors have been selling down the IGO share price on Wednesday following a warning from Goldman Sachs regarding battery material prices.
According to the note, its analysts believe that prices have peaked and will fall heavily over the coming years. Though, this isn't necessarily a new view, with Goldman warning at the start of last month that lithium prices would fall materially in the near future.
However, on this occasion, the broker has taken aim at a range of battery materials.
According to Marketwatch, Goldman is forecasting the following (in USD):
[…] lithium falling from $53,982 a metric ton in 2022 to $16,372 a ton in 2023, cobalt $78,500 a ton in 2022 to $59,500 a ton in 2023. Nickel is likely to be firmer, at $31,000 a ton in 2022 to $30,250 a ton in 2023.
This is based on its assumption that between 2022 and 2025, there will be a 33% increase in lithium supply, a 14% increase in cobalt, and an 8% lift in nickel. Whereas the broker is forecasting annual demand growth rates of 27%, 11% and 7%, respectively.
As IGO has exposure to a range of battery materials, investors appear to believe that this could mean it falls short of consensus estimates.
Though, it is worth remembering that forecasting commodity prices is notoriously difficult. So, prices could behave very differently to these estimates. Time will tell if that is the case.
