These 'increases' are exciting but not just for the reason you think. The recent 'rally' in lithium prices is actually partly and illusion caused by exchange rate changes, not just an increase in supply and demand. Not at all to ignore the fact that supply is not keeping up with demand, but it's worth understanding the full picture.
Unlike commodities like oil and gold which are usually reported in $US, we are usually looking at lithium prices in communist genocide credits, er, Chinese Yuan Renminbi. This is a very important difference.
To illustrate the point, let's look at the 1 year chart between the $US and the RMB (Chinese money):
View attachment 4781419There is a clear trend here, with the RMB falling significantly against the $US. So, if the price of lithium was to sit completely still in $US, it would appear to be rallying if we were to measure it in RMB, which is what we do. If lithium prices were reported along all other commodities in the same currency ($US), some of these daily increases would be seen to be zero.
However, we are neither Chinese or American (speaking about most people in this discussion in an economic sense, not an ethnic or cultural sense, though I also would guess most here are multigeneration white Australians, yes, with some exceptions). So what's relevant to us is the price in $AU, since that's the currency most here will be spending most of our money on and what we will all be selling our AGY shares for at some stage and what they're traded in (I'm a bit of an exception to the spending side there, but I'm talking about the majority of people here).
If we look at the Australian dollar vs the American dollar, we can see that the increase in lithium prices is more extreme by the metric most relevant to us! Let's look at that chart:
View attachment 4781437I'm guessing most people actually see this as a 'bad' chart because it's 'going down', but what it means is that while every Australian dollar buys fewer American dollars, each American dollar buys more Australian dollars, and since we are going to be converting everything into Australian dollars to establish an AGY share price, that means a higher share price in Australian dollars. I could have put $US on the left and it would show a 'positive' graph but anyone who didn't already understand it would have still not understood and just said 'oooh, chart go up, me have more money' which would be the wrong interpretation.
I won't put up a chart, but the RMB and $AU have been fairly flat against each other over the last year. By this metric the rally has been approximately the way it seems on the lithium price chart in RMB in the way most relevant to most of us, but purely by coincidence, and that will probably change.
While on this topic it's worth noting that where currency rates are very relevant to the true fundamental value of companies in terms of their share price/market cap in relevant currencies, exchange rate differences such as we're seeing here, often don't influence to share price in the short term, probably because TA doesn't usually factor it in at all and the people calculating fundamental value often overlook it, but in the long term it certainly does come through.
Definitely happy to be an AGY holder, and more as an Australian with AGY being on the ASX than I would be as an American if AGY was American-owned and I was trading it in $US. And far more than if I was Chinese in China, but I'd probably be more concerned about my nightmarish existence in an Orwelian Hellhole than stock or commodity prices.
