I wouldn’t call it excessive optimism. IMO a return to higher prices is the only thing that will make the likes of GXY and PLS ramp up production. They aren’t going to ramp up just to make even larger losses. So the Chinese will have 3 options:
1. pay up 2. don’t pay up and risk not having enough supply for your own operations, risk losing profits, and potentially risk losing business and market share to your competitors. 3. Find supply from somewhere else
Regarding number 3, where else is there to go to obtain supply that is ready RIGHT NOW?
Regarding the Chile mines, as far as I know expansion projects are all currently on hold. There’s a battle royal going on between miners, the Chile government and environmentalists. The Atacama desert is the driest desert in the world and yet you’ve got SQM, Albermarle and BHP all taking from the same water source. Last I read they didn’t even know how much water from that source remains. They say that the desert has a fragile ecosystem and I believe is the largest breeding ground for the pink flamingo, so environmentalists are putting on the pressure. There have even been protests.
I am sure the miners and money will eventually win and there eventually will be expansions, but even so this will take some time to happen.
There was an article out not too long ago titled where does your lithium come from? It was about the EU wanting to only source lithium from ethical and environmentally friendly sources. Both Volkswagen and Daimler have scrutinised Chile lithium, with concerns over sustainability
CXO Price at posting:
4.2¢ Sentiment: Buy Disclosure: Held
