I have been looking at supply chains lately, and have rediscovered the obvious.
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Something that many governments talk about, but really do little in practicable terms to fundamentally alter.
And that is creating your own supply chains and your own logistical ecosystem.
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It seems to be happening in the RE space, albeit slowly, and has been accepted as a viable path forward.
Mostly because in that space, it is fundamental to defence, and many western nations military complexes.
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Refining seems to be the key in both lithium and rare earths, amongst others, where not enough of the West's efforts, focus and capital, have been directed.
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In our specific case at NAL, we have a carbonate plant that has produced at demo capacity. and was in the process of being ramped when RB energy went under.
It could be improved to commercial capacity with one third to half the cost of a greenfield site, and probably in less time.
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All that is really needed is the desire, the improvements in design and the capital.
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In its current form, besides the cannibalised parts, a crystallizer could complete the current circuit, circa us$80m, of which Veolia has the spec and the design.
The plant could then theoretically produce circa 20k carbonate pa, as per the original design.
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However, it would not be reliable, not be efficient, be prone to constant breakdown, and ultimately be unviable for the JV.
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If the plant was upgraded, the pluses in this case would be a dramatic decrease in shipping costs from around 150/tonne for spodumene concentrate, to around 30-40/t for 1 t of carbonate, if it was going to Becancour, or somewhere else close in North America.
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So as a concentrate producer at nameplate, 226000, we are looking at losing 16,950,000 for the JV share of 113, and a similar amount for PLL to cover for their 113, with a grand total of US$33,900,000 or over 50Million AUD across the 2 business'.
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Remember, 1t of carbonate is around 7.5t concentrate , and if we shipped 7.5t concentrate, it would cost us around us$1125 to ship that tonnage.....as opposed to us$30/t, for 1t carbonate shipped locally.
A big benefit for the JV, and one even Keith has acknowledged.
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As for shipping carbonate in North America, at the new plants nameplate of 23000LCE, we would be looking at around US$690,000 TOTAL, if headed to Becancour. 690K!
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Massive, massive difference.
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Almost unbelievable....
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So for a project touted as one of the best located globally, it sure is hurting us at the moment, without a refinery close by.....which will continue until such time as we can ship to the incumbent refiners at Becancour and Corpus Christi Texas, or wherever the pop up near us.
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For Sayona, it would also unshackled us from the PLL offtake, and afford us greater margin on every ton sold. We could go from a loss making enterprise to a profitable one.
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And this is where the creation of new supply chains is crucial, if the west is ever to truely decouple from the current status quo.
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Then China spot prices will become a price, but not THE price, as the currently are.
Governments need to support local refining.
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The local supply chain could look like-
NAL spod, NAL carbonate, Becancour cam plant, Ontario battery plant, Ontario/ Michigan/Ohio EV production, and new EV's into the local market. CAM and battery plants are being currently built and could all tie into 2026.
Fully decoupled....So, Screw China....
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Contracted pricing can be set where everyone makes a margin, including our spod production, carbonate refining, the cam maker, the battery maker and the EV manufacturer.
Many of the local EV manufacturers, now have partnerships for CAM plants and battery production....and some for concentrate offtake, and even a smaller few for refined material.
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But continued low pricing, the sirens song for the west, has us continually sucked into the narrative.
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Security of supply has not been threatened for lithium, so western governments continue with their lack of refining investment and predominately leave it to industry to work out.
Except for many of the legacy makers, the independent or local supply chain is just not happening quick enough.
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The main game, the Chinese domination of the global auto sector is here.....a lot quicker than western governments thought possible.
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Lithium pricing has fallen again, both in concentrate and refined salts.
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At current prices, we are uneconomical for concentrate, and making a little profit for carbonate, at a rate of 700/t opex + 3500 to refine.
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Concentrate spot US$1000 6%...5.4% its 910. DMT is close to 850, and we lose 150 to shipping. So, 700/t barely break even...uneconomical long term.....and we have not been receiving spot by the way, well below it.
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With an efficient carbonate plant, we could produce for around 7.5x700= 5250 plus 3500 for refining= 8750/t, making around 2500/t profit. 23000 nameplate x 2500= US$57,500,000, just under AU$100 Million profit for the JV at current prices.
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That is , If our opex comes down to 700.
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Many here have baulked at the capex required for NAL's carbonate plant, but hypothetically, if we did head in that direction-
-The PLL offtake will be minimised, and both members of the JV could be in profit (not sure where it would leave PLL's offtakes)
-We would probably attract local funding from Quebec, where previous estimates were around C$200M
-Federal funding may also be allocated
-We would probably attract an offtaker and funding, and keep their equity share to a minimum.
-As well as, It's Sylvain's end game to fire the carbonate plant back up...its his baby....
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So the desire, we already have the design and capital....
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Remember, LG gave PLL 75M for 5.7% of the company, preferential treatment for concentrate allocation, and a discount to spot price for every tonne supplied, and Nemaska have previously been supported by funding from Quebec and local institutions.
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If we could pull 300M in total from the Quebec and the Canadian governments, and 100M from an offtaker, the JV's capex for both PLL and SYA could be greatly minimised or best case scenario, eliminated.
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That is if Canada truly want to decouple from the Chinese supply chain for lithium.
With the right team in place, they may consider it.
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It makes sense to me, it always has.
Many others have a very different view and that's their prerogative...
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So, will Dow take the company in this direction, or will we get more of the rhetoric of words and intentions, but not much else?
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In terms of the broader lithium market, this week, a couple of big players in China declared some fairly hefty losses.
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Some say its a big sook and signal to the CCP, to start shifting the lithium prices north, and shift some profits from this supply chain back their way. BYD's profits are up a whopping 80%, so it may be time for the CCP to peg that back and share some of the spoils with the rest of the supply chain....all the way back upstream. They do try to spread the wins.
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We have seen many false starts before....so don't underestimate China's ability to supress prices for the long term....many analysts have.
There was a theory going on that we have hit another bottom, and the back end of the year will see a rising lithium price, now coupled with the major players in China, seeking to recoup some profit, as well as the demand side seeing continued EV growth and adoption, and home storage''s unrelenting boom.
In terms of EV's, we are also seeing some heavy users of lithium like F150 lightning's, Cybertrucks and transport semi truck prime movers, with increasing sales.
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Will it be an end to the lithium doldrums?
Let's hope so.
As always, Time will tell, because logical analysis sure hasn't worked to this point!
Good luck everyone...
(20min delay)