WR1 General Discussion, page-35378

I'm sensing your despair at the Lithium market, and despair and capitulation usually happen quite close to the bottom. I also own quite a few of these so I understand the feeling but I think that we're quite close to an inflection point. A few points ...

Notwithstanding a slower than anticipated EV rollout in the US and Europe, lithium demand growth has actually been strong thanks so very strong EV uptake in China and growth in BESS globally.

All the catchphrases about "high prices curing high prices" and "low prices curing low prices" depend upon free market economics and we all know that China has a strategy to subvert free market economics in order to dominate selected industries. So yes, lithium supply growth has also exceeded expectations but nearly all of that has been high cost supply ex China and ex Africa (China controlled). That is the supply that is supposed to come out of the market to achieve balance, yet they have continued to add to it. I wouldn't be surprised if much of that is costing $1,200 to $1,500 (fully costed) to produce, which is why even as China has expanded its wall of supply overhanging the market to keep a lid on pricing, it has continued to buy every tonne available of Australian spod first at $800 and now, even better at $600 SC6 equivalent. And it will continue to probe lower prices so long as we are dumb enough to continue selling to them. So long as China controls 80% or more of global processing it can act as a single buyer, a buying cartel if you like, and dictate pricing.

The inflection point to which I referred is just starting to happen in the rare earths space. China crushed prices to decimate western companies attempting to build a supply chain in the early 2020s, and now it weaponises its domination by restricting exports of magnets so that the west is forced to scramble for limited alternative supplies or allow China to build the end product and buy that from them. For all Trump's faults he does get this stuff, and will use all available levers to encourage a rapid buildout of western controlled supply chains, from mining to processing to manufacturing. Those levers include government grants and loans, support price mechanisms and national strategic reserves. Essentially a recognition that you can't use free market economics to fight China's state directed industrial strategy where profitability is not a constraint.

The rare earths space is small but very strategic. The EV / Battery space is larger but also strategic. I don't think China will be permitted to control the market indefinitely and I suspect changes will happen sooner rather than later.