Benchmark Intelligence Lithium Research, page-44

@ozblue let me commend you on the compilation of Spodumene output both confirmed and projected over coming years. I don't read much of the PLS threads but did a catch up this weekend. It appears we are singing from the same hymn book.

I'll be starting with the negatives:
I've been trying to communicate the massive scale of new spodumene production brought online and the medium term affects on the WA spodumene producers. Simply put, the increase in production has been severely underestimated.
Given the surplus of Li Chemicals globally as represented by the fall in Li Chemical pricing, the converters are producing more than the battery makers can utilize. Therefore while some converters were offline upgrading, it could hardly be called a bottleneck.
All the bullish expections of a Li Chemical shortage in 2023 would still leave a significant oversupply of Spodumene.
What is clear to me is that global Li Chemicals production is on track to exceed production of 1.1mtpa LCE by 2023 from current and proposed expansions.
The integrated producers like Tianqi are more than comfortable with the ability to produce 1.8mtpa SC6 by the end of 2020. Some claim that in light of a spodumene glut they will scale back the expansion. However I don't believe this is the case as their SVP has recently stated that their Li Chemicals which are considered the benchmark in BG standard are in short supply with half of their product exported to South Korea and Japan IIRC. This is the advantage of being a low cost integrated producer.
Tianqi also anticipates output of brine derived LCE at 200ktpa by 2023 from SQM.
With Orocobre anticipating 42.5ktpa within 18 months, Lithium Americas / Ganfeng bringing 25ktpa online within 2 years. Livent in Argentina currently produce 30ktpa LCE. Albermarle anticipates 40ktpa from its Chile Brine operations this year. Smaller AGY could produce 10ktpa LCE by 2023. Advantage Lithium 25ktpa LCE by 2023. This isn't a complete list
Therefore 2023 could see brine based production of Li Chemicals of approx 375ktpa as a base case but 450ktpa LCE by 2023 is feasible.
Spodumene could see 2mtpa from Greenbushes by end of 2020. GXY Mt Cattlin 200ktpa. A40 160ktpa. PLS including stage 2 by 2022 would produce over 1.1mtpa spodumene concentrate. AJM 180ktpa. Mt Marion 450ktpa (2019). Wodgina minimum 750ktpa (train one) could assume 1.5mtpa by 2023.
Therefore WA spodumene output by 2023 includes 5.6mtpa. At a ratio of 9:1 (splitting the difference between those that believe in a factor of 8 or 10) WA spodumene at a minimum would supply 620ktpa LCE.
Would be reasonable to assume 50ktpa LCE could be produced from clay bearing Lithium between Bacanora and Ioneer amongst others)
I haven't included Chinese raw materials and many other global sources ie Nemaska or LPD. I also didn't include AVZ because it's my opinion that given the spodumene glut I don't believe it will enter production prior to 2024.
This brings my tally to a minimum production of 1.1mtpa LCE by end of 2023 based on current and a selection of the more realistic announced production expansions.
Further breaking it down, in my opinion brine has higher margins for Li2CO3 and similar margins for LiOH compared to spodumene. So brine sourced Li Chemicals (which will no doubt increase their purity during the next 4 years while lowering opex) should have a cost advantage over spodumene based Li Chemicals.
So being bullish enough to anticipate moving 1mtpa LCE global demand requirements forward to 2023, I see an excess of Spodumene production of at least 900ktpa at that time.
Non integrated converters in China are receiving pricing currently at the marginal cost of production. So any further fall in Li Chemical pricing will reduce spodumene consumption.
I have repeated many times that it is quite likely that in the medium term spodumene will remain in over production and it will give a great deal of power to integrated producers whom will have much greater stability with lower costs and no exposure to low spodumene pricing.
The best positioned hard rock players in my mind to become true integrated producers are GXY (with intentions for James Bay & SDV alongside talk of buying into a converter in China) and PLS. Those spod producers without ownership of a converter will be the ones to suffer along with the independent converters they supply to.
Let me be clear, I anticipate the potential for a shortage of Li Chemicals from 2023, however I believe spodumene will remain in surplus

Now here's the positives
I have surprised myself in recent days especially after listening to the PLS earning calls and am now bullish given its ambitions to become an integrated producer of Li Chemicals - negating the reliance on the needs of Spodumene offtake partners requirements, it's absolute focus on reducing costs and its cash flow looks manageable. It was informative to hear they are looking to offload 25kt of SC5.5 in coming months which will be separate from anticipated shipments for the quarter which are SC6.0.
Overall I was very pleasantly surprised. I am looking to take up a position as I believe it has become more derisked than my previous DD. It is good value now between 40c - 50c.
AIMHO I don't intended to offend and am not down ramping.