Chilean Protest - Supply

The price elasticity of supply is a measure used in economics to show the responsiveness, or elasticity, of the quantity supplied of a good or service to a change in its price.

There are threeextreme casesof PES.

1. Perfectly elastic, where supply is infinite at any one price.

2. Perfectly inelastic, where only one quantity can be supplied.

3. Unit elasticity, which graphically is shown as a linear supply curve coming from the origin.

I would argue that the lithium sector sits somewhere close to Perfectly Inelastic. This is due to the nature of evaporation ponds and the lead times to production for hard rock mines. In many cases these projects take 5+ years to see first stage production.

The sector is an infant and still maturing. It is this very nature that has led to extreme cyclical fluctuations. Its easy to say the market is flooded with supply, but the reality is how hard is it to flood a micro market? Its like flooding a bath with water v's trying to flood a swimming pool. Volume and time.

The current price levels in the market for lithium will result in a huge shortage in supply as prospective junior explorers are deterred from progressing mines to construction (lack of financing options and incentive at current price levels) along with existing producers being forced to scale back production output.

Lets see how long the current "over supply" situation last for, cause when things turn, it will be swift and extreme. Just ask Paul Graves from livent.

The autos need to secure their supply chains, 2020 is 2 months away.