LOL - ok 140's then. I don't have a problem with people arguing the case for their particular investment strategy, so fair enough - as long as everyone reading understands we all have an agenda (although mine fluctuates with the hour - sometimes I want it higher, sometimes lower). My point is that the SQM CEO is no more reliable than the GXY CEO on this matter . One says that the spod prices for will be higher for their product in the second half, based on their customer's upgraded and expanded converters coming back online, the other competes in a different sector of the market to GXY and wants to scare off these same converters from investing in expansion of capacity as much as possible, and has a history of misleading statements about capacity or returns, none of which have been fulfilled over the years. If he was that concerned about pricing, why is he still planning to expand? The reality is the expansion timeline was nonsense from the start and now he needs an excuse for why it hasn't happened. It was simply never going to happen at the pace they claimed but he can't admit that.
So it comes down to whom we are going to believe. If GXY is right then the company will be making more money, if not they will be making the same or maybe less,but it isn't going to be 25% just because hydroxide is coming down to sensible pricing from a market over pricing when they don't even compete in that space, and the same thing will happen to chloride eventually which is the current over priced product, just as it happened to carbonate before. They have all been too high in the early part of their cycles, while supplies ramped up. As price comes down the early entrants gain scale cost advantages which offset sales price reductions - which is what we are seeing with GXY, who have had a year to learn how to increase production and reduce costs and have now progressively implementing that for six months.
Spod is cheaper to convert to hydroxide than brine (the SQM resource) but more expensive to convert to carbonate than for brine producers, - hydroxide is where the spod producers have an advantage - and with hydroxide demand expected to continue to increase because it is used in the high capacity batteries, and carbonate expected to drop (which is where SQM competes). Because there are lower standards required for carbonate batteries some of the spod producers will be stuck in that end space and thus SQM's market outlook is very different from GXY's. GXY's customers are among those who have upgraded to hydroxide for which GXY's spod is apparently suitable so GXY can go to hydroxide or carbonate as needed and they have a higher margin now than most of their competitors. Brine may shine again with chloride however.
I sure don't think that the situation has changed by 23c on the SP in the space of 24 hours because SQM can't compete with cheaper spod producers in the Hydroxide space and are stuck competing with in the carbonate space where they have a cost advantage - albeit getting smaller as the Chilean Gov keeps pushing up their royalties and farmers launch court actions to recover water table damage. The market will think otherwise for a few days, I accept, but it will revert like it always does (i reckon).
Now we clearly have a different short term view. My view is that GXY is at the start of a (possibly) medium term upswing, your view is it is still in the down trend, which technically it still is until it busts 180 and probably really until it hits 200. Where we seem to both agree is that it is a trading opportunity right now both up and down, rather than a plunging rock - at least until the next black swan event - which could be any time, even tomorrow, we just at this stage have different trigger prices. I think it will become clearer next week.
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