Hi @bejk3,
I will attempt to explain my thoughts regarding your question about supply from Greenbushes and Wodgina and how I see that affecting pricing for non integrated spodumene producers in the future..
Firstly, let me clarify, I believe that in the medium term spodumene market pricing will reflect the margins of independent converters within China and these margins will be determined by the combination of pricing they receive for their Li Chem products and the rate at which Aus SC6 producers are willing to sell. What I believe will be different going forward is the former will be the key factor for spodumene market pricing.
My late night observations may not have been clear enough in the following respect, however the way I see it is that with the removal of desperation from Australian producers to shift product at any cost, combined with largely stimulus induced demand increases flowing upstream, I am anticipating a controlled increase in SC6 pricing. I am not saying no increase at all till 2023.
While some independent producers were and still are to a certain extent struggling financially, it is my opinion that Ganfeng for one took advantage of the situation. This was at a time independent SC6 producers were looking to support their less powerful customers for long term strategic gain.
I watched Ganfeng operating without significant pressure, not just demanding to breach contractual floors like at AJM, but wanting equal or better pricing than their local Chinese competitors. This was despite their stronger access to the high paying exclusive qualified tier 1 customer base.
My observation was that they were taking advantage of knowledge that AJM had no choice but to move product (likely through pressure from their financiers) and drove a very hard bargain. This in turn enabled them to play AJM and PLS off against one another.
So what I was suggesting was the lack of leverage on price negotiations allowed SC6 pricing to depart from Li Chem pricing influence and reach what was clearly an unsustainable level.
@8horse has recently shared some interesting reports out of China from Ganfeng that are worth looking through if readers have the time.
Now when I write that spodumene market pricing itself is a feature of the independents outside the integrated bubbles, I expect it to once again be influenced more heavily by Li Chem pricing. This is where supply from Greenbushes, once converted to Li Chems will have an impact through increased supply. I believe their major expansion CGP2 is not currently operational and they are still proceeding with construction of their tailings reprocessing (TRP) expansion.
It was very pleasing to see spodumene pricing finally form a floor albeit at an unsustainable price, and these past days show several upticks on SMM (my preferred publisher of market pricing). As I wrote it still has a long way to go to reach a level that would encourage all existing built and operational projects to return to full capacity.
https://www.metal.com/lithium I highly recommend this site as a resource for independent research and the Chinese information contained in their reports is often missed.
I posted around 6 months ago that predicting pricing for Li products even 18 months out is like throwing darts and more recently argued that despite surging demand, there is great deal of built spodumene capacity to work through and I expect patience will be required as pricing climbs in a measured and somewhat controlled manner back to incentive levels and then in time well above those. I apologise if some got the impression I was claiming there would be no Li product price increase until 2023.
I do keep a very close eye on various projections from agencies regarding demand and note that during early stages of Covid, it is my understanding 2025 demand was reduced from a general consensus of 1mtpa LCE, down to 800ktpa and now back to 1mtpa.
I also follow the Aus Industry Quarterly reports that include Roskill driven forecasts. The most recent 2 have been striking in their difference.
June 2020
https://publications.industry.gov.au/publications/resourcesandenergyquarterlyjune2020/documents/Resources-and-Energy-Quarterly-June-2020-Lithium.pdf
Sept 2020
https://publications.industry.gov.au/publications/resourcesandenergyquarterlyseptember2020/documents/Resources-and-Energy-Quarterly-Sept-2020-Lithium.pdfI have also written previously not to underestimate the speed at which new capacity can come online - particularly by incumbants of which there were few during the last boom - and this was demonstrated to great effect by the speed and scale of oversupply of spodumene in Western Australia as multiple new entrants came online.
Again, as I have been writing for quite some time, patience will be required IMO before the local industry sees SC6 pricing comparable to the last boom. I believe it will happen - well perhaps not to the same extreme but certainly to exciting levels - given time.
So to answer your question, while integrated producers don't directly participate in setting spodumene pricing, with the desperation and "forced sales" removed, along with potential leverage enhancing consolidation of operations, those players will influence indirectly through their contribution to Li Chem supply.
While Wodgina is unlikely to have the sort of cost advantage of Greenbushes (I expect it to have similar opex as PLS), despite Tianqi's current woes, the advantage Albermarle and Tianqi have from that operation is far too significant to dismiss. As you can see from the following cost curve, Greenbushes sits on the far left side with a massive opex advantage.
https://roskill.com/news/lithium-over-50-of-spodumene-supply-marginal-in-q2-2020/Even if the Chinese State doesn't organise a bailout or facilitate a restructure, Tianqi's assets are low cost, tier 1, and there is no reason to believe Greenbushes will go offline. I would sooner expect Tianqi (Or the entity it may become) to start selling to third parties in China if it cannot afford to commission and operate Kwinana, given the obvious margins available from the sale of their spod.
I hope that helps clarify things.
(20min delay)