Banter and general comments, page-36547

While I'm not disputing China has property price issues, they are not cascading to an absence of either auto sales or EV sales as may be expected. You have been noting China property issues for the whole of 2023. As per below, China annual car sales increased 12% during 2023. Something is preventing the property price issues cascading to slow car sales in a way that would happen in western economies. It could be that China has much higher high savings rates than in the west creating a better ability to afford the property price impacts.

The first time China broke 800k per month Sales was September 2023. It was an all-time record. October then exceeded that record. November then exceeded that record. December then exceeded that record. While this may not have met some analysts expectations, EV demand in China is very strong and growing.


Other battery types
IMO Sodium batteries have similarities to Lepidolite. Both are sub-optimal substitutes but they become economic when lithium and other battery material prices are particularly high. In the case of Sodium batteries I recall perhaps a year ago forecasts by one of the major reporting agencies (Benchmark or Fastmarkets) that Sodium would be 9% of battery supply by 2030. A more recent estimate revised that estimate down to 3% (so 97% Lithium, 3% Sodium). In a beaten down lithium and nickel price environment, there's no need to use sub-optimal substitutes. Unless Carbonate spends an extended period at prices like 300-400k RMB or more, Sodium batteries are going to remain a minor part of the market.

Lepidolite
Lepidolite has the same sub-optimal substitute properties. You can process it to get carbonate but its more expensive than using Spod or Brines. What you would expect is minimal to no production in a low price environment. Increasing production in a higher price environment. In 2023 Lepidolite is was providing significant lithium units into the market. GS estimated it at 140kt LCE which as context compares to Australia production being 153kt LCE in 2019. Lepidolite is nearly the equivalent of all Australian mine output pre-covid. With none of this lepidolite activity involving Australia, there is very limited visibility as to what's happening. If its now loss making and reducing not increasing you have a massive reduction in supply which lessens the impact of the new hard rock supply that's coming online.

ESS demand is also growing strongly.

The past correction
While tempting to look back to the past, this price correction is not the same as following 2018/2019 when EV demand was small. The graph below shows Australian spod exports. The previous cycle oversupply was created as Australia shifted from exporting 60kt per month to 160kt per month in just over a year. That was too fast for the market when EV demand at the time was low and only starting to build.


What supply growth is required to meet demand
The LiO2 to LCE conversion factor is 2.473x. If a project like KV were to process 3Mt of 1.3% grade ore to 6% concentrate with a 80% recovery rate, they would generate 77kt of LCE [3000 * (1.3%/6.0%) * 80%] * 6% * 2.473]. The last GS estimate I've seen had the no-adjustment demand growth in 2024 at 238kt LCE. You need 3 KV projects starting production every year to meet demand growth (although growth in brines might help). On slightly higher demand growth estimates, this becomes three Pilgangoora's as recently also stated in the media. That has managed to happen in 2023 and could happen in 2024.

If its achieved in 2024 its through ramping existing projects and Mt Holland, KV and Leo's Mali project all successfully commissioning. What is then delivering the 2025 growth? The pipeline for that 2025 growth seems a little empty so we have perhaps a part of 2024 problem not a 2-3 year problem. Commissioning issues at any of the three projects mentioned above could create 2024 shortages.

With some of the supply side adjustments happening, we could have a brief period of shortages in the first half of 2024. There will be no supply contribution from Mt Holland, KV or Leo before the 2nd half of 2024. Greenbushes is reducing supply. Lepidolite production volumes are trending down. 100kt+ of new LCE demand is likely to occur on projections. Many western battery plants will start to by inventories for commissioning. That could create a shortage that emerges in the next few months but is temporarily resolved if known projects commission successfully.