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James Heal

@jdsheal

I hope all #lithium watchers are paying attention. These supply forecast cuts by #GS and #UBS are staggering. Back in the day, when I was a sell side analyst, this would have been career ending. Not because the estimates were wrong, but because it shows a total lack of joined up thinking - something that analysts are meant to be good at & paid the big bucks for.

It goes something like this:
1. There is excess supply
2. Prices will go lower
3. There will be a supply response & possibly a demand response
4. Prices will normalize
5. Rinse & repeat The teams at GS and UBS seem to have stopped at point 2.

In large commodity markets like oil, iron ore and copper it makes some sense given long industry lead times and flattish cost curves. In a nascent/immature #lithium industry it makes zero sense when the fundamentals can change on a dime driven by the action of just one or two industry players at the high end of the cost curve. As they say 'the cure for low prices is low price' just as much as 'the cure for high prices is high prices'. My hope is that as the industry moves out of its 'teenage' years, increased scale, diversified supply resources, established supply chains & stronger balance sheets will result in more mature cycles & maturer 'teenage scribblers'.