Auquan's Weekly Wrap | 13-17 June: What you might have missed

Recap of the week's market activity: The underestimated lithium supply/demand imbalance, Stellantis US layoffs, WTO e-commerce tariffs discussions, Sainsbury living wage proposals, and more.

Auquan's Weekly Wrap | 13-17 June: What you might have missed

Top Themes

Global Lithium Shortage

Over a month ago, Auquan flagged how the market has potentially underestimated the lithium supply/demand imbalance. Lithium-ion battery and EV manufacturers supply chains' are exposed to raw material shortages, with the outlook set to worsen as investments in downstream EV factories and battery plants are outstripping investments in upstream lithium mining.

Recent research from Benchmark Mineral Intelligence has now called out Goldman Sachs' prediction of “significant” new lithium supply coming from China, where companies have invested in new hard rock and brine projects. When digging deeper, it’s unlikely that an unprecedented rampup of marginal, unconventional feedstock will fill the deficit, and unlikely demand will weaken.

Stellantis US Layoffs

The world's fourth largest automaker will begin an indefinite layoff starting next week at it's Sterling Stamping plant - the largest stamping plant in the world. With 2,184 employees, including about 2,000 hourly workers - a letter posted on the Facebook page of United Auto Workers Local 1264, said that the "indefinite layoff will be from the bottom up," starting as early as June 20. This has potential disruptions to an already impacted auto supply chain with component shortages.

WTO E-commerce Tariffs Discussion

Global technology firms are pressing the World Trade Organization to exempt data flows from cross-border tariffs. These digital duties are threatening higher consumer prices, examples include cross-border Amazon purchases, Netflix movies, Apple music and Sony PlayStation, with companies saying a failure to do so would undermine a global recovery already threatened by spiralling prices.

Sainsbury Living Wage Proposals

Depending if the wage rise proposals are approved by leading investors (HSBC, Legal & General Investment Management and Fidelity International are part of the coalition), Sainsbury’s may either look to offset these costs- axing certain operations in favor of outsourcing, however with an upper limit to this could struggle on their focus on driving prices lower to be competitive, with further pressure to pass these cost implications on to consumers.

We may see industry wide further price hikes, further accelerating the already high inflation and a further spiraling the cost of living crisis in the UK, which has implications on many other industries.

Rising Themes to Watch Out

ArcelorMittal Mexico Workers Strike

Continuation of last week's Stellantis Mexico Labor Rights Probe, which followed Panasonic's.

Air France Pilot Strike

Exacerbating the already trending aviation staff shortages and travel chaos.

India Cotton Price Hikes

Increased cotton prices will put a stress on the working capital and liquidity of small-sized cotton yarn spinners. This, along with fuel prices straining RMG exporters, is squeezing margins for Asian apparel makers while their global retail customers are reluctant to soak up the extra costs.

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