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The "Evil Empire" Marches On.......
Over the past few days I have had several interactions with trusted sources in China who are either purchasers of lithium products, converters or analysts who know the market well. The result is the summary slide below that illustrates what happens when a Joint Venture with a near term monopoly decides to start playing "hard ball".
At least for now China market pricing (notice I no longer am saying "spot pricing") is totally disconnected from the global market price. I don't know how long this situation will last but it could be long enough to cause serious problems in lithium ion battery supply chains as companies take time to adjust. A doubling of lithium price will not "kill the market" but it will cause more than one supply chain manager to behave "like a deer in the headlights".
My feeling that prices would rise significantly have been public for quite a long time. Did I expect to hear of large consumers in China being offered prices the equivalent of $20/kg? No, I didn't.
For now, major markets outside of China are getting used to paying 15-20% more than last year while their counterparts in the Middle Kingdom are looking at 2X pricing. I expect the "Big 3" will honor their price commitments but woe to those who are not under contract or who signed only a quarterly deal. Any incremental material will be priced much higher or likely be shipped to China.
It is going to be an interesting year but you won't be hearing much more from me on Linked In in 2016. Hopefully I have provided a better understanding of the opaque world that is lithium but for now it seems to make more sense for me to go quiet for awhile. You are more likely to see my limited public thoughts on Twitter: @globallithium.
If you invest - do your own research. High prices in China do not make every lithium junior a good investment.......
Joe Lowry
https://www.linkedin.com/pulse/evil-empire-marches-joe-lowry
