Spodumene Prices, page-1475

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Timber7

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141

12/10/21

21:28

Post #: 56750406
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Originally posted by Dandelion: ↑

@Timber7 Thanks for linking MS's price forecast, it's always good to have alternative views. I'll answer here to avoid cluttering the chart thread.

MIN & Albemarle have surprised quite a few of us by continuing to sit on their hands. That decision alone seems to have tipped the market into deficit in 2021, though it arguably couldn't have prevented it without ramping up from Q1 '21. Regardless, due to commissioning and qualification requirements, plus the acquisition of labour, it's no longer possible for MIN to make an impact in 2022. They've reiterated their decision to withhold spod from the market.
The general consensus seems to be that the industry has moved into an annualized deficit of 25,000 tonnes in 2021.

Morgan Stanley suggests a demand increase of 23% next year, which might equate to about 90,000 tonnes pa.So they're anticipating an annualized 115,000 (25+90) tonne deficit that needs to be accounted for in 2022.

They identify several sources of expansion:
- 30,000t equiv LCE (Ngungaju). Due in full by mid 2022.
- 90,000t (Wodgina), due some time in 2023.
- 22,000t (Kwinana), due by Q4 2022 at the earliest as stated by Tianqi/IGO.
- 45,000t (SQM), construction completed by Q4 2021, commissioning & qualification 1H 2022 at best.
- 40,000t (Albemarle @ La Negra & Silver Peak), due progressively over 2022, ahead of SQM.

Giving MS benefit of the doubt, let's assume all that new supply will be battery grade, and those facilities will run at full capacity (both impossible).

Carbonate prices are currently hovering at US$28,500/t in China, with another leg up flagged.

So the research from Morgan Stanley suggests:
(1) There'll be no further supply in 2021, yet LCE prices should recede from 28,500/t to 19,500/t (USD) in 2H 2021.
(2) A Utopian scenario where an additional 115,000 (30 + 45 + 40) tonnes of new supply comes on by Q3 2022 to meet a 115,000 deficit.

So according to MS's own figures, despite no significant supply relief until Q4 2022 (using the most idealistic scenario), they expect a precipitous (>50%) drop in spot LCE prices from Q2 2022.
Isn't it slightly illogical?

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Im sure there's an explanation but I cant make sense of what you have written. Current demand is at "red hot" levels per research paper. So what they are suggesting is that this is going to taper off towards the end of CY21 at around 53%. In CY22, same issue but at 23%. So if yoy demand is running at 80%+ they are suggesting this is going to normalise thus affecting prices.

PLS Price at posting: $1.96 Sentiment: Hold Disclosure: Held
2 Upvote

0 Great analysis

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