CHINA WILL BE VERY MUCH SHORT IN LITHIUM, page-95

@Egeria

I get the basis of what you are trying to convey, but it doesn't hold as much water when we move into the realm of vertical integration.

What is occuring is really quite complex. I'll stick an IMO disclaimer here at the top of the post to avoid having to use silly weasel words throughout when I don't want to spend time fully substantiating.

Take CATL for example, I think we all understand that what they produce upstream has no direct impact on reported Li pricing. What they mine and convert remains in house. The way in which they manage the oxygen is that being a massive purchaser of upstream materials, when they source enough internally it creates oversupply. If they then purchase Lithium Carbonate as an example, there is far more product available from suppliers that had built up anticipating their product would have a home. In this way, their Jianqxi integrated operation has an indirect impact on pricing.

CATL take a loss at Jianqxi and in turn offset that loss by purchasing the far greater quantity of non-integrated feed at a price point lower than what may have been. At that Li Carb point in the supply chain, despite losing money on Jianqxi they save more because of the excess supply they have engineered.

Regardless they are very much focused on the downstream profits and that is working out very well for them.

There is this persistent idea that independent converters in China must be loss making and in general, given finished salt prices and cost of feed, they should be. However one aspect that is not spoken of enough is the impact of the futures market. I believe one poster mentioned it earlier today and as mentioned in my thread, I intead to dive into that topic before the launch of the new exchange. It would seem that converters and traders within China are using the futures market to offset or minimise losses.

I get the impression that many lump China into one great basket when there are many players large and small. A company like CATL can use it's weight to manage the oxygen (I have repeated that phrase because that is what they stated they will do when it comes to the supply demand balance for feed). Smaller independent converters that do not have the advantage of vertical integration- particularly downstream from the current oversupply point. Interestingly they have used the futures exchange as a tool.

Separately I have discussed the level of advancement in terms of efficiency, scale and technology improvements driven by a survival of the fittest scenario. https://hotcopper.com.au/threads/china-and-its-role-in-lithium-supply-demand.8598671/

Another factor is the geopolitical strategies unfolding. China absolutely wants to hang onto it's ⅔ share of Lithium Carbonate / Hydroxide processing. The most significant contributor in that remaining ⅓ are Li salts from South American brine sourced production; SQM and Albemarle's Atacama, Chile operations are massive, and there is some finished Chem grade product out of Argentina. The minor remainder comes from sources like Chengxin's Indonesion converter (supplied by a mix of PLS and it's own Sabi Star high grade integrated African mine), POSCO's South Korean JV converter with PLS (obviously supplied by PLS), Tesla (Corpus Christi Texas hardorck Hydroxide supplied to this point by Piedmont from NAL SC), some of Albermarle (Silver Peak, but for those interested they recently postponed a major US refinery development) and RIO's North American conversion facilities (Bessemer being their primary) that are primarily fed by brine, Toyota / Arcadium JV in Japan (refinery to upgrade TG Carbonate from SA brine), and of course the uneconomic Australian converters you all would know. I guess I need a second hand now to count the number of large scale converters outside China.

The geopolitical angle has seen continued investment without an incentive price that covers Capex and in some cases within China and Africa does not appear to cover Opex at this point. It is clear that to some degree China is pushing and subsidising non-integrated mining and conversion or even integrate mining + conversion that is likely loss making without those upstream entities being able to make it up from downstream opportunities.

So, @Egeria, I get your angle but disagree on the mechanics of it. To do as you imply with your question, we would need to see more consolidation within China - and that might not be an attractive proposition for CAM or cell manufacturers etc without State inducements.

I agree on your point about bifurcation upstream. I'm also very wary of the results of Western endeavours like Northvolt, what happened with Nemaska years ago now, and the high likelyhood that Australian conversion of SC has failed as an economic proposition. Ultimately, Western battery manufacturers may face political pressure to purchase product outside of China, however obviously if they have the opportunity to purchase Li Chems, electrolytes, CAMs etc from China they will want to rather than pay substantial premiums.

I agree it is likely that African miners have currently ceased offering product, however a distinction needs to be made between posting the equivalent of a "for sale" ad for SC of Lpd and supplying offtake partners or their own integrated converters. The lack of offers mentioned does not mean Africa has ceased exporting.

I think I have convered why it makes sense for the true vertically integrated operators to make a loss at the mine level - I've been referencing CATL because they have been the loudest voice in that regard. I don't think what CATL has done is bad business or a lack of understanding.

I agree with some of your discussion of the maturity of the Lithium sector. It's all opinion and I respect when posters share their opinions without declaring them fact. In some respect you saved me some time and glad you picked up where I posted this afternoon. That is when HC works well; genuine discussion in response to, or inspired by what others have posted.



Anyways that's my 15 minute cutoff for this post. Apologies in advance for any typos etc as I won't be proof reading.

GLTAH.