The more dire the financial state of a company the more pressure there is to turnover material as opposed to tying up cash in inventory. This exacerbates the price movement and is consistent with the current market sentiment. If prices are expected to fall further you sell what you can as quickly as you can.
It works both ways, we saw how quickly prices moved when sentiment turned, in a rising price environment producers are more inclined to hold back supply and push prices higher.
Re China - Africa, I never really subscribed to the whole conspiracy theory that China is manipulating prices and out to crush Australian producers. Australia banned foreign, China specific, investments in mining assets. There have been a number of examples of failed takeovers and controlling interests over the past 24months across the spectrum of critical minerals, blocked by Firb. The ongoing Geopolitics and talks of circumventing China, alongside the FIRB rules has forced China to look for alternatives. It just happens that they have a long history of working in Africa, where they have moved quickly to sure up long term supply of critical minerals including lithium.
With vested interest in African spodumene projects and integrated downstream supply Chains they can absorb mine losses further downstream and still remain profitable. The cost curve analysis at mine level does not tell the whole story. Similar applies to Lepidolite, yes it is low grade, expensive, environmentally unfriendly but majority of it is produced by CATL who benefits from lower priced raw materials.
Supply moderation from Aus producers - other than Mt Catlin and Finnis (core lithium) it may take a while to see any material supply discipline. The cost curve position does not factor in any austerity measures the produces may implement short term to trim costs. This was on display in the last down cycle, high grading feedstock, deferring cutbacks / sustaining capex, cancelling capex entirely on select projects, expansions to spread costs over larger production base etc etc.
All to say we should see costs come down near term, how much is anyone's guess. There is a big cost associated with care and maintenance, redundancies, demobilisation of people and equipment, having to hire, demobilise and ramp up again etc. It's not an easy decision to make.
For Wa producers like MinRes the most likely outcomes is they get a strategic partner to come in at the Project level, Koreans most likely or a large trading house, before they start moderating supply.
The key difference in this downturn vs the last is that China is still taking the full, growing, volume of Australian spodumene. I recall the last downturn well, the offtakers simply refused to take product, what they took they dictated grade and specs, with complete disregard to binding offtake agreements they had signed. Sorry we don't need it today, we will let you know when we do.
Watching the supply numbers is key imo in picking the bottom of the cycle. Whether that is producer induced or buyer induced. For the time being the supply numbers keep rising and the supply is still absorbed downstream albeit at the expense of lower prices.
Ltm specifically, one should look at the carbonate cost curve, not spod, given majority of their sales is carbonate. On that curve the spodumeme producers are on the wrong side of the cost curve. Spod does incredibly well in a rising price environment with the advantage of scale / volume growth which more than makes up for lower margins vs carbonate, but on the flipside are much more susceptible to downturns given they inherently sit higher on the cost curve. Obviously does not apply to Greenbushes which is an outlier.
Aimo
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