Will Lithium Follow The ‘Super-Cycle’ Of Mining? – by Robert Rapier (Forbes Magazine – February 28, 2023)


There’s an old adage for commodities that says, “the cure for high prices is high prices.” The inverse is true as well. In fact, I often heard this phrase when I worked in the oil industry.

At the same time, I often heard people say “But this time is different. This time there is no easy cure.” I heard that in 2008 when oil prices first topped $100 a barrel. Many people were predicting $200 a barrel. But a funny thing happened. Those high oil prices caused a recession, which reduced demand, which reduced prices.

Here is why the adage is generally true in both directions (at least in the oil industry). When prices are high, oil companies tend to invest a lot more into increasing production. But there is a lag between those investments and additional supply. So, prices may be high for a while, which can also 1). Slow economic growth; and 2). Influence consumer behavior to consume less.

Thus, new supplies may come online even as demand softens. That often results in a price crash in which investments dry up. Eventually demand recovers, but new supply stagnates. Finally, the excess supply dries up, prices start to rise, and the cycle repeats.

For the rest of this article: https://www.forbes.com/sites/rrapier/2023/02/28/will-lithium-follow-the-super-cycle-of-mining/?sh=3dc185df44fc