I believe mid-term this article could result in a favourable...

I believe mid-term this article could result in a favourable re-rating of a stable Australian supplier such as PLS
NOT ADVICE - DYOR SOURCE BOOM FINANCE

LITHIUM PRICE COLLAPSE -- LITHIUM SUPPLIES DISCUSSED Almost anything can be scaled up in production over a short period with adequate finance. But if/when the finance runs out and the revenues generated are inadequate, the clock starts ticking. Last week, a reader pointed out to BOOM that global Lithium supplies had effectively doubled in volume over the last 3 years (some reports show a tripling). The suggestion was that the supply of Lithium could continue to grow at this pace in the future thereby providing sufficient Lithium supplies to fuel the future renewables based, energy transition revolution. Theoretically and logistically, there may be an argument that this could happen. However, BOOM makes the point that there is a practical limiting factor here in the long run and that is finance. Lithium carbonate prices fell past CNY (Chinese Yuan) 91,000 per tonne in July, the lowest in three years, due to a surplus of raw materials for electric vehicle battery manufacturers. Despite this, Lithium miners and producers have continued to expand capacity and hunt for new reserves, magnifying expectations of oversupply. The EU has recently put tariffs of up to 38% on Chinese EV producers in response to subsidies-supported dumping. These tariffs begin immediately. The US has quadrupled duties on Chinese EVs to 100%. That has caused a 15% monthly drop in June of new energy vehicle exports from China. Bloomberg BNEF, in its recent New Energy Outlook report, stated that its net-zero scenario would cost US $ 250 Trillion by 2050. That is a staggering amount of investment money to contemplate. To put that into perspective, currently, at the end of 2023, the total global volume of sovereign and corporate bond debt outstanding stands at about US $ 100 Trillion, similar in size to global GDP. So, the “transition” to the renewable “revolution” will add another $ 250 Trillion to global debt and global GDP? Solely to finance and build a completely new energy system? This will be no mean feat. BOOM asks the tough questions. The problem is this — investors will have to be found to take on this debt, be it either private or public. So where will they come from? Mars? BOOM cannot see any scenario whereby these huge, planned future expansions in renewables and electric vehicles can be adequately financed in the long run. Lack of commercial viability is the ultimate test. Finance demands returns. And all finance moneys in a capitalist money system MUST (eventually) come from the private sector unless huge Quantitative Easing “money printing” Programs from central banks are used. If private sector investors are convinced that these dreams are not commercially viable, dis-enchanted and unwilling to invest, then the private finance simply will not and cannot flow. And surging CPI inflation will be a limiting factor if governments decide to finance it all through QE programs (“printing money”). Almost all of the crashing share charts that BOOM displayed last week in renewables companies and electric vehicle companies demonstrated clearly what is already happening. The exceptions, currently, are Tesla and BYD. Their shares peaked 2 - 3 years ago but are not falling as quickly. They are still able to attract finance but for how long? Tesla and BYD must (eventually) create solid post tax profits from making cars. Then, they must pay adequate compensatory dividends to their shareholders. And if they cannot, then the finance will stop for them too. The clock is ticking. Is this the beginning of the end with only the true believers holding on? LITHIUM PRODUCTION PROBLEMS As explained last week, for the “renewables” revolution to continue in the long run, global Lithium production will have to grow by almost 9 fold by 2040. That means an annual Lithium production exceeding 1.8 Million Tonnes in just 15 years time. Current production is around 200,000 Tonnes. Data Source: Energy Institute - Statistical Review of World Energy (2024) No commodity in history has increased at such a rate for long periods of time. Theoretically, maybe even logistically, it can be achieved if sufficient Lithium exists in a state ready for mining. But private finance does not increase at such a rate. It never has and it never will. BOOM’s hypothesis is that private sector reluctance is now, already, VERY obvious in regard to investment in renewables and EV’s. This is no theoretical problem for the future. If private investors cannot (or will not) fund this commercially non-viable expansion, then nation states will have to do so. That will require huge increases in their budget deficits because taxation revenues cannot possibly provide sufficient funding for such ambitious government spending over and above current levels. The energy “revolution” and “transition” cannot be funded either by private investors or by public bodies. That is the hard truth; the reality we all will have to face, sooner or later. The Lithium Price Chart and the charts for most renewable companies plus the charts for most EV companies reveal what is happening. The future is here already. Investors just don’t believe the hype anymore. LITHIUM PRICE CHART 5 YEARS — Source: Trading Economics The Nickel price chart and the Cobalt chart reveal the exact same phenomenon. NICKEL PRICE CHART 5 YEARS COBALT PRICES OVER 5 YEARS THERE IS ANOTHER PROBLEM FOR LITHIUM — IT IS CALLED CHINA China has risen quickly to become not only the top Lithium processor and refiner, but also a major miner of the commodity. In fact, China was the third largest lithium-producing country in 2023 in terms of mine production, behind Australia and Chile. Chinese companies are mining in other countries as well, including top producer Australia, where they are part of major Lithium joint ventures. For example, Australia’s largest Lithium mine, Greenbushes, is owned and operated by Talison Lithium, which is 51 percent controlled by Tianqi Lithium Energy Australia, a joint venture between China’s Tianqi Lithium and Australia’s IGO. AND THERE IS A PROBLEM FOR COBALT PRODUCTION — IT IS CALLED CHINA The Democratic Republic of Congo is the source of over 68% of the global cobalt supply. China's influence in the cobalt mining sector of the Democratic Republic of Congo (DRC) has been significant since the Sicomines agreement in 2007. As part of the agreement, the DRC provided mining concessions for copper and cobalt to the Chinese consortium. In exchange, the Chinese companies agreed to invest billions of dollars in infrastructure development in the DRC, including roads, hospitals, schools, and railways. This influence has led to most DRC mines being fully or partially owned by Chinese entities. AND THERE IS A NICKEL PRODUCTION PROBLEM — IT IS CALLED CHINA The United States and Western Europe, in particular, have a supply problem for Nickel. The US is the 9th largest producer of Nickel in the world. In 2022, it produced only 18,000 Tonnes. Russia produced 220,000 Tonnes. Indonesia produced 1.6 Million Tonnes. And the Philippines produced 330,000 Tonnes. Increasing amounts of production capacity in Indonesia is now processing the country's laterite ore into other forms of nickel such as matte and MHP as a metallic route into precursor materials for batteries. Much of that production capacity is owned and operated by Chinese companies. And China also has a reliable supplier of Nickel in Russia. The simple fact is this — the major economies of the West have major supply problems for Nickel, Lithium and Cobalt. China is well prepared with supply. So, where will all the batteries come from for the coming “energy transition”? And let’s not forget that China also dominates the production and supply of rare earth minerals AND solar panels. To BOOM, it appears that the advanced Western economies are purposefully digging their own graves with their dreams of energy transition. Are the so-called leaders of the Western world that dumb? Or dumber?