Joe Lowry: One of the World’s Leading Lithium Market Experts.
This has been a strange year in the lithium world. There has been a constant stream of good news about long term demand growth from the electric transportation and ESS markets. Yet, lithium stock prices have dropped precipitously largely due the constant din from the “oversupply camp” that a “tsunami of supply” from Australia was about to enter the market via China converters and crash lithium chemical prices.
In 2018 there is some level of “logic” to support either the short term “oversupply” or “tight market” view. Those who believe lithium start-ups are easy have no support from history but that belief is the cornerstone of “oversupply” thinking
However, in my opinion, the vast majority of data still supports relatively tight supply and strong lithium prices for the next few years. Strong price does not mean the highest China pricing from 2016. As long as the market is tight the price will not be cost curve driven but a result of market forces: meaning above and in certain cases, such as today, well above the cash cost of the high cost producer.
If at some point in the future we move to a true, sustained oversupply situation, the lithium price will be cost curve driven but that will still not yield a return to 2015 prices as some of the big banks posit. The cost curve is moving north.
Cash costs in the Atacama have more than doubled based on the new royalty and current pricing. The high cost converter in China buying spodumene at current market pricing has cash costs for lithium carbonate and hydroxide near $10,000/MT. If the converter exports, an additional cash cost in the form of VAT must be baked into the pricing they can offer.
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