Gisteren heb ik geluisterd naar de Global Lithium podcast Episode 179 with Joe Lowry. Hier schets hij een mooi overzicht rondom het huidige lithium klimaat. Ik heb de key take aways hieronder samengevat:
Supply & demand:
• Prolonged time of price below high end of the cost curve to produce lithium is not logical. Can occur temporary to re-balance supply and demand;
• A lot of the excess supply in 2023 wasn’t lithium chemicals, it was inventory of cells, cathodes. The supply chain was stuffed in 2022 when we went to peak prices. In 2023 we saw a lot of unwinding of the supply chain, and we might see a bit of unwinding in 2024;
• When we look at the lithium-ion battery supply chain there is excess capacity, and what China typically does is overproducing when it can. We are going to see de-stocking and re-stocking in the supply chain and that is going to impact lithium chemicals. This cycle always repeated historically. This will keep on happening and as long as China has a disproportionally large position in the global lithium-ion supply chain, China`s lack of discipline in this regard of too many suppliers, to many capacities that’s going to affect lithium chemicals and spodumene;
Press and Politics:
• Popular press creates negative sentiment, especially in the US regarding EVs (eg.: Tesla project slower growth in 2024 and EV demand softens). There is a negative EV story virtually every day. It is a political issue, as we are also in an election year. EVs have been completely politicized: `Prices are down 80%` narrative: Yes, the Chinese spot price decreased if you count down from the peak to the lows. The contract prices in Japan and Korea in 2023 were higher than in 2022;
• The US media distorts what is happening. EVs had a great year last year globally. You can’t just take the US in isolation when you are writing these headlines;
• China is so far ahead in producing EVs that the US press only follows the narrative of Tesla, Ford and GM and the 2 last ones have not done a very good job of making the transition;
China can make and sell EVs at each price point. The growth has slowed globally, but if you look at absolute numbers, then is still increasing;
US vs Chinese EV makers:
• Tesla, Ford and GM don’t make low priced EVs. They will only catch up if they produce lower priced models which an average person can afford.
New Supply pipeline;
• Investments in early-stage projects is drying up. That will exacerbate the shortage later in the decade and we will likely have a similar cycle as we have seen at the lows in 2020 to the miraculous rise to the ridiculous levels in 2022;
In this cycle we still have lithium chemical prices, even in the Chinese spot markets in the low $10ks/ton. If you go back to 2020 there was lithium sold at $4k/ton into China;
• $80k/ton in a short term brought in garbage lithium carbonate to China, shipped from Africa etc. A lot of it was lepidolite. During the last cycle where prices peaked around $30k/ton, lepidolite didn’t see the kind of rice as in this cycle with peaks at $80k/ton. In this environment it made sense to use lepidolite;
• There is not a shortage of lithium values in the world and at a high enough price you can have a lot of poor quality supply of lithium carbonate;
• We should watch in 2024 how the narrative unfolds, how much lepidolite can stay in the market at these prices. Some of it can, most of it won’t. A lot of these projects in Africa were started when people thought that the endless summer of high prices would not end. Most lithium which comes from Africa is of poor quality;
On prices:
• This time, we had higher lows, and hopefully in the next cycle lower highs (Lithium is still a small immature market);
• If you look at current spot prices in China, then they are still substantially higher than in the past;
• A $13k/ton lithium prices is still very attractive to the low end of the cost curv;
Outlook 2024:
• The sentiment is still so negative that I expect prices will keep current levels for 1-2 quarters. I think that prices will come up as I don’t believe that we can maintain the number of supply that we had at the current price levels. As the cost curve has substantially changed there is more low-quality material in the market that costs more to produce;
• In China, they will keep operating as long as they are cash positive and that is a reality we have to live with. We need an incentive price in the mid $20k/ton. $30k-40$k/ton is the next prices bandwidth by the end of 24Q3 or in 24Q4. I don’t know exactly what is going to happen of course. I do believe that you can’t have prices behind the high end of the cost curve for an extended period of time;
• Lower prices create additional demand, as new project funding is drying up supply will decrease. This will not only play in 2024 but are long term factors;
On direct Lithium extraction:
• Watch on how this plays out. There will be no massive DLE projects coming online in 2024. Some of the majors are now doing demos (e.g. Exxon). I don’t believe DLE will yield much production in this decade.