I think this interview with former PLS boss Ken Brinsden helps put this in perspective.
If anyone knows the supply & demand side it's ken
The relevant part below
Take the spaces out of st ock head
https://st ock head.com.au/resources/qa-industry-legend-and-ex-pilbara-minerals-boss-ken-brinsden-is-singing-oh-canada-in-return-to-asx-lithium-market/?utm_medium=email&utm_campaign=*%20Morning%20Newsletter-11-27-2022&utm_content=httpsstockheadcomauresourcesqaindustrylegendandexpilbaramineralsbosskenbrinsdenissingingohcanadainreturntoasxlithiummarket&utm_medium=email&utm_campaign=Morning%20email%20Monday%20November%2028&utm_content=Morning%20email%20Monday%20November%2028+CID_b7c955eb8643e3b22d7bf10804deb04d&utm_source=Campaign%20Monitor&utm_term=QA%20Industry%20legend%20and%20ex-Pilbara%20Minerals%20boss%20Ken%20Brinsden%20is%20singing%20Oh%20Canada%20in%20return%20to%20ASX%20lithium%20marketThere’s a lot of ill-informed commentary in lithium markets. And it’s kind of a shame because, in some respects the investing public put faith in especially the big banks, but the truth is, the big banks are not close to the lithium market, really at all. And as a result, a lot of their commentary is just fundamentally flawed.
“Most of it comes from the perspective that they want to shape the market based on historical paradigms in lithium raw materials and that just does not work for a market that’s growing as quickly on the demand side as it is for lithium, and for that matter the difficulties in growing supply.
“If you were shaping your commentary about lithium markets in the 2020s based on the 2000s or even to a certain extent the first half of the 2010s you’re fundamentally misreading the market, it has completely changed.
“And the growth that’s underway means there’s a whole heap of new paradigms that describe the shape of the market and that’s the phase that we’re going through now. They mostly get it wrong on the supply side.
“Analysts want to sort of imply that supply will come easily but nothing could be further from the truth. Lithium raw material supply is really difficult to develop and will be for quite some time because the mines are measured in five to seven to 10-year increments for development, and that’s just not the speed that’s required for the demand side growth that’s going on.”
Is there any real comparison historically that you can give to explain the growth in demand for lithium that we’ve seen over the last five years?
“It’s a little bit of a dangerous analogy, because it’s a completely different mineral species, but a good example of resource growth that changed the shape of a mineral market is what happened in iron ore between 2006 and 2015, there was a decent decade of demand growth motivated principally by China at that time.
“Iron ore seaborne supply grew about two, three times and the price in the early part of the 2000s was defined by cost support at US$25-30 a tonne because that’s what the Pilbara operations cost. But as the market grew, and the demand growth from China came on, a whole heap of other iron ore projects came to market that completely restructured the cost curve basically built out the right-hand side of the cost curve.
“And now there’s price support in iron ore between US$70-100 a tonne, obviously very, very different to historical norms. So when I think about what’s happening in lithium raw materials, I think of that as being not a bad analogy to describe what’s happening in lithium raw materials, but it’s even more extreme because the market has to grow 10 times between 2020 and 2030.
“And as a result, a whole heap of projects are going to come to market and in fact some are already that are much higher cost than historical norms in lithium raw materials, and that’s why there will be a completely restructured cost curve and therefore price inputs.”
The idea of demand growing 10 times in a decade is mind-boggling.
“Well that’s one of the analogies and the second one, in this respect is very different to iron ore. Lithium is fundamentally a specialty chemical, it’s not a commodity, at least not yet.
“The quality paradigms that have to be delivered to support the battery industry are very, very high. And actually higher than historical norms in lithium raw materials as well.
“So that’s redefining a market that would have otherwise just required an average specification to support greases and ceramics and some of the some of the other historical uses for lithium raw materials.
“So those two things are motivating a completely different cost base, supply growth in new projects that are much more expensive than historical norms. And the second thing is the very, very high quality threshold that’s driven by the battery industry, which is where all the demand is coming from.”
Is that something people don’t really understand? I’ve heard anecdotal stories of how difficult it’s been to get the quality up to spec at, say, the Australian hydroxide plants.
“That’s exactly right. That’s the challenge that the industry has to meet and it’s typically going to be solved with cost, additional cost to purify the materials to be suitable to go into a battery. And that’s why some analysts, not all, but some analysts and especially some of the big banks with recent reports are completely missing the new shape of the industry.”
(20min delay)