-That last post got me thinking about the bigger picture of lithium prices, and in particular the impact that Chinese converters stockpiling or destocking material might have on spot and contract prices...
If we look back at the second half of 2022 prices were skyrocketing and converters were buying whatever they could at virtually whatever price they could - including any leftovers from BMX auctions and the like at top dollar rates. The psychology for most of 2022 would have been buy as much as you can now, or pay more next month.
If you were a chinese converter sitting on a reasonable pile of raw material, enough for the say the next 3 months of operation (I'm not sure what kind of inventory they typically sit on so this may be way off), and some investment bankers start publishing articles saying lithium prices are about to freefall and global demand is going to weaken - what effect would that have on your stocking strategy moving into the new year and the typical seasonal weak period centered around CNY etc? Logic would say the urgency around stockpiling raw material at whatever price you can get it, would weaken? And if you can operate for 3 to 4 months in a seasonally quiet period on the stockpiled inventory knowing that at the end of that period you can not only order more with a short lead time, but at a fraction of the price - it would be pretty bad business sense not to back off a bit and destock inventory for a while.
So perhaps those analysts forecasting a drop in demand and weaker prices was somewhat of a self-fulfilling prophecy?
My guess is the recent upswing in share prices across the lithium sector is because those in the know realise this, and chinese converters are now in restock mode again, as well as moving into the seasonally strong period for battery manufacturing related activity.
I wouldn't be surprised if we start to see spot prices reacting quite violently upwards once the fomo kicks in again later this year and converters scramble to get as much as they can and sit on it before they are forced to pay higher prices later on.
For those that think charts are useless - here is one showing the share price over the calendar years of 2021 and 2022 with those seasonal trends shown pretty clearly.
We had the same ABC correction just after CNY in early 2022 as we have had this year, and that was followed by a violent rise again from June to November.
A similar pattern occurred in 2021 also with a 61.8% drop in the share price in January 2021 after the first bull run up.
My guess is the second half of this year might end up seeing higher prices and more violent upward moves than the two prior years, and I suspect the BEOT know this too.
If anyone knows roughly how many months worth of stockpile the converters can typically hold I would be interested to know?
(20min delay)