PLL General Discussion, page-649

The problem with the GS forecast is it is self defeating . A lot of the additional marginal supply it is relying on is lepidolite from China but sub 20000 usd that stuff is back being uneconomic and will be left in the ground . Beneath about 30000 usd for LCE you’re not at any sort of incentive pricing which is needed to encourage the supply curve to expand for a variety of sources to match an ever growing demand curve .

By definition mining is a multi year , almost decade long exercise to bring on new supply , so the very idea you can have one or two up years of high prices and that acts as a long run incentive to expand supply it just nuts . You need higher prices to stick for multi years to encourage the risk taking . The real world here departs from the textbooks , economic agents have to factor in risk to get capital and need even higher returns to take on the risk ( hence the concept of something called incentive pricing ) , something the standard economic models struggle to quantify .

No doubt even the lepidolite producers in China wouldn’t be forecasting a drop back to 11000 in 24 and 25 as Gs are , if they were they wouldn’t be bothering to expand their production now only to go out of business in year. If these marginal suppliers wouldn’t supply at 11K , why would you think the price goes back there ? Gs need to actually read some basic economics textbooks, a bit of Adam smith goes a long way still .

Basic rule of microeconomics is that price is always formed at the margins by what is necessary to induce the marginal buyer and seller , that price in my view given the seismic shift of the demand curve to the right with evs , and the demand curve has moved first then the supply curve now responds by raising the price necessary to keep that expansion of supply catching up .

The only way the Goldman scenario could play is a massive demand destruction event occurs. Possible but I would argue remote . You now have Tesla dropping prices to encourage a further pickup in final demand . This is the other subtle factor one needs to realise , those demanding LCE or LiOh are the converters and cell producers who in turn sell to the car companies . So if the car companies are going to continue to chase demand growth as Tesla currently is , the converters / cell manufacturers have no choice but to respond to their demand . Companies like Byd at the end of the supply chain can try and jawbone down the price but ultimately such Jawboning is just words if their actions are actually directed in the opposite direction to expand sales.

Then their is the recognition that even if a massive demand destruction event one needs to understand is this a permanent event or a timing event where people transitioning to electric just slows right down for a few years ? Given all the indications by car companies and government this change over will happen by 2030-2035 depending on country , one thinks any demand destruction event could only be temporary .

If it’s temporary and the price collapses then all you do is force a delay in the supply response such that you’re probably locking in for even more years the supply / demand deficit that now exists . In turns this simply will drive the price back up again for LCE . So whatever way you cut it , unless there is a complete change to the permanent nature of this transition , ie the world decides evs are no longer the way forward , which I would contend that die has already been cast , then you are probably locked in a world of much higher prices than the 11K figure Gs are referring to for 24/25.