Also, what this PLS report and that of GXY’s shows very very clearly, is that miners simply cannot make money at current prices. Both GXY and PLS have leaned on product stockpiles to manage cashflow, and their actual costs of producing new product are higher than what customers are paying.
As is widely recognised, this is not a sustainable situation. Those customers are lucky that some suppliers actually have these stockpiles (and cash in bank) to lean on, or else the suppliers would be shutting up shop sooner, as their cash runs dry.
So, this market balance has resulted in a few suppliers selling at a loss (sales prices under total cost of production) and imo, this all ends when:
1/ suppliers close shop, shifting the market balance and thereby increasing prices, and/or:
2/ demand increasing, also shifting the market balance and thereby increasing prices
It seems like we have seen a bit of (1) and are now/soon seeing the beginnings of (2).
Bottom line is, it is NOT a sustainable situation, and those suppliers that have survived and will continue to for another 6-12 months (imo) will reap the rewards of the turnaround in pricing.
Imo it simply has to happen, because if it doesn’t, then those 158 megafactories won’t get what they need to operate, and big auto will be paying massive fines for exceeding emissions limits.
It’s a lull. Temporary. It hurts, but it simply cannot persist much longer due to the fundamental supply-demand-cost aspects of business.
BMI has shown that the balance is currently quite close to neutral anyway, and even with “highly probable” new capacity coming online to meet demand increases, there will still likely be a supply shortfall in 2022. And it just gets worse (increasing shortfall) from there. The million dollar question is how far in advance will the customers and market start to scramble in anticipation of this inevitable shortfall..? Perhaps it is starting already, albeit a bit slowly... imo in the next 6-12 months it will start to get rather spicy!
Good times ahead!
Anyway, I know you know all this, just thought it added to the topic and some others may find it useful.
Cheers
(ps. I’m hoping to get in on a decent pullback, if there is one, after umming and ahhing a few months back at 15c! Bugger!)
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