I tuned in to today's Patriot Battery Metals webinar to hear what Ken Brinsden had to say about the overall market. He gave some very relevant insights into both what is currently happening as well as where he thinks things will go next. I've copied the link below and have noted the timestamps for the relevant market commentary.
Webinar: Patriot Battery Metals (ASX: PMT) - Investor Webinar by Read Corporate (bigmarker.com). If you wish to view the presentation, you will need to register.
26:53-33:10....Discussion in equity markets are in stark contrast to those going on inside the Industry. As much as the market is "ordinary" today (at least from a Chinese Spot price point of view), there is huge construction underway for future Gigafactory production. Gigafactories are popping up everywhere (US, Europe, China, etc). China overbuilt LFP capacity resulting in the price spike in 2022. They have now been through the process of de-stocking. Cheap cells ($50-60/kWh) have driven growth in demand. ESS using LFP cells are undergoing a massive rollout. Tesla ESS sales up 160% compared to last year.
China drove the growth of pretty ordinary, low quality feed for Lithium...and this has resulted in higher cost than historical norms. It has built out the right hand side of the cost curve. Today, those avenues aren't cost effective. "I can assure you that this Industry has every chance of surprising to the upside". China hasn't finished growing demand yet and there's a lot more growth to come in the Western world.33:30-37:32....The cost base has doubled in the last 3.5 years. Industry still has to grow another 3x between now and 2030. Western supply chains are very focussed on alternative supply to China - a key imperative. Western supply chains will be more stable than China's because
Western markets are more motivated by fundamental qualification criteria and the quality of the supply chain as compared to the highly diverse market that has developed in China that can tolerate any grade and any price on any day. They are the sorts of things that contribute to China's volatility vs very linear and stable supply chains that are expected to emerge in the West.
40:13-41:30....There is lots of engagement going on within the Industry about where to take the future Western supply chains. Glad that LTR has had success with LG as it provides another data point that shows how active the Industry is in sorting out the question of alternate supply to China.
41:45-44:32....The supply chain is still active in China.
They can only go slow and de-stock for so long and they can only subsidise low grade and lower profile projects for so long before they come back to market and look to re-grow their stocks. That's coming. In the West....it is remarkable just how little product is IRA compliant. What we are going to see are more sophisticated deals than those that have been done historically - and that's what needs to happen in Western supply chains to change the game. China has a pretty poor quality supply base going into their supply chains. Producers going into production later this decade don't necessarily have to be too concerned with China's price today....it really doesn't represent the future of the Industry. The Industry can't be sustained at today's price and it won't grow at this level so, of course there's going to be a change....it's just a question of when? Sooner rather than later!52:35-54:08....The right hand side of the cost curve being built out is the area that has been grossly underestimated by most investors and most of the analyst community. China are getting away with it today as they are subsidising their supply chain to protect them from $50-70k/T Lithium chemicals.
The net effect of what they are doing is to print higher pricing for longer in the long run - as China potentially starves the market of capital for projects that should be developed elsewhere to ultimately lower the cost curve. We shouldn't be surprised to see Spodumene at US$2500/T and Lithium Chemicals at US$30-40000/T!The Industry has a long way to go but expecting a sophisticated and stable part of this Industry to come about in the West in the later part of this decade.
Great to see this perspective from within! Also note how different Ken's views are from those that the usual suspects on here are trying to get readers to swallow!
