re:Lithium demand surge, page-1154

"The question is wouldn't that put pressure on spodumene prices, and result in weaker prices?"

Yes, however ...

All OZ hard rock spod is contracted output to offtakers. Note the article mentioned GXY had uncontracted output but even they have relented.

Supply is much easier to gauge than demand. However given the nature of this disruption, demand is only limited by supply.

Downstream production managers know their profitability is relative to maximising production capacity. THE LAST THING THEY WANT, is idle capacity. To avert this, they contract supply to be ASSURED of a steady flow of input.

Spodumene supply is still problematic in the battery chain. The Americans and Chinese have Greenbushes sewn up. The Americans have Wodgina. The Chileans have Earl Grey. What's left? The Chinese have Mt Marion and the articles states Mt Caitlin is now contracted.

However the article states that most suppliers fail to reach projected output, so you could expect uncontracted supply to fill the gaps and perhaps to cause Lithium price spikes.

So, I don't see conversion capacity as the problem.

I think most of us would agree that this disruptive change will occur as fast as possible. The consumers interest has been piqued with ads for quiet, pollution free, low to no maintenance, fast accelerating cars. Marketing begins with product discrimination and very soon, price discrimination.

The battery chain is expanding as fast as possible, leading into lower battery prices by virtue of scale. The most important feature of its speed, is how much raw material can be supplied. I really don't see the low MS prices as achievable. There'll certainly be rationalisation along the way to shake out the Chinese suppliers.

Our contracts have an inbuilt floor price. Some have mentioned USD550 but its still unconfirmed. In 2022, at 6.2mtpa, gives 1mtpa of sc6 at floor price less USD200 in cost plus downstream ($50m) profits and 75c exchange rate, gives $2.13 (on 8 times EBITDA). Conservative.

A recent Bloomberg article said Solid State is still 5 to 10 years away. LiOH will be the go during that time and we'll average USD750 sc6 prices, is my guess. First mover advantage. Advantage PLS.

Our friendly neighbourhood (shark?) Ganfeng has been circling AJM and PLS. I'd still like to know why Ganfeng's Stage 2 contribution was CR while Great Wall's was prepayment. They were both supposed to be by prepayment or debt facility. Interestingly enough, they are participating in all 3 stages and are the major determinate of our sc6 contract price.

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