Banter and general comments, page-9787

Profits get taken, it happens.

What doesn't happen very often is a demand growth story as strong as lithium. IMO people naturally start applying what they know from other minerals and products to lithium. A big increase in supply causes prices to return to "normal" levels. This occurs for metals and other minerals where an increase in demand of say 10 or 20% caused a price increase. New supply comes on and the demand problem goes away. Its easy to say its different this time, but so many factors point towards Lithium being different.

Many in the market read 2x, 4x or 5-8x growth, but they don't really understand what that means beyond it being a big number. 2x growth is huge and its the phase the lithium market is in now. It means that a new equivalent for every single in production mining asset is required. A 2nd Greenbushes, A 2nd Pilgangoora, Mt Cattlin, Mt Marion etc are all needed. In the Brine space, another SQM sized operation (and all the other brine operations) needs to be built. A second version of every Hydroxide plant is also needed somewhere. This step is well on the way on the production side as care and maintenance mine's come back on-stream (Wodgina, Authier etc - except Bald Hill). Early mover's like Core come on, and projects like FFX's, LTR's and SQM/Wesfarmers Mt Holland go ahead. Depending on your project list, it may be more than doubling. Its less clear that Hydroxide/Carbonate processing capacity exists to convert all the new Spod to Lithium Hydroxide. I think Tesla has realised this is a bottleneck, hence engaging with a pre-production entities (Core) around its phase 3 plans for Hydroxide. Overall Lithium supply was 500 LCE in 2021 so this step gets supply to 1000 LCE

The next step to 4x (2,000 LCE) is the bit where the market hasn't got its head around what's needed and that's in a few years where the market needs to do this doubling again. There is some overflow from the above step to help this, but basically a new variant of every circa 2024/2025 in-production mine is needed. This time only Bald Hill is on care and maintenance and available to come on-stream so there is minimal assistance from restarting operations. Another greenbushes is needed, as is another Pilgangoora, Mt Cattlin, Mt Marion. But this time another version of Kathleen Valley, Finniss, Wodgina, Mt Holland and Goulamina are also needed. AVZ could well be one of these but a lot more than that is needed. Some of this will come from supply increases on existing projects but I fundamentally doubt how many of these projects can realistically double production (or would want to as this would half the life project life from existing reserves). Secondary supply will help a bit, but most cars will be running for 10 years so you are typically looking at recycling production volumes from 5-10 years ago (which wasn't much). Then there's the talk of strategic reserves and funds backed by stored reserves. This takes supply out of the market.

Then there's the issue many demand predictions are 2750-3000 LCE by early 2030's with some 2040 estimates around 5,000-6000 LCE. Beyond the x4 doubling step there's potentially another repeat of the doubling needed. Eight new Greenbushes and Pilgangoora mines is not easy!!

Econ101 says that when there's a shortage of supply and prices stay high. Announcements that Mineral resources are bringing back care and maintenance resource and looking at capacity expansion delivers the 2x phase a little earlier. It doesn't really change this story and was also reasonably predictable. It doesn't change the demand gap to the market most likely needing 2,500kt+ of LCE.