Episode 223: Listener Q&A

Hi, it's Joe Lowry. Welcome to another episode of the Global Lithium Podcast. Today is episode 223. It's a solo episode. It will be relatively short. I am going to respond to some listener questions about some of the issues of the day. I am recording this on November 19th. I am in Los Angeles. The first day of benchmark week is over. I'll refer to some of the presentations and goings on here. The first question is from Christie in Perth and it reads, "Given the recent rebound in several ASX Lithium names, especially PLS staging, one of the more fascinating comebacks, what does this tell you about how the market positioning is for 2026? Are we seeing early signs of a genuine supply demand tightening or just a sentiment reset?" It's a great question. To answer that, I am going to refer to remarks reportedly made by Gangfen founder Lee Langbin in a conference earlier this week in Shanghai where he really shocked the Lithium world by being very granular in his remarks. Normally, Gangfen is very circumspect about the way they talk about the future. They play their belief cards very close to the vest, but this time, Mr. Lee went out and said, as quoted and translated with translation software, "Global Lithium carbonate demand in 2025 is 1.45 million metric tons." That was the original number. That's my comment. However, due to demand growth in the second half, the full-year demand figure is expected to be revised upward to 1.55. Supply capability exceeds 1.7, resulting in a surplus of approximately 200,000 metric tons, which has kept prices relatively low this year. However, he went on to say that he believes Lithium carbonate demand will grow by 30% in 2026, reaching 1.9 million tons, while supply will only increase by 250,000 tons, leading to a basically balanced market in 2026. He also goes on to say that demand could grow 30% or even 40%, and then supply will be unable to balance in the short term, and prices may break through 150,000 yuan per metric ton, or even 200,000. This comment was a big deal. Gangfan, as I said before, is usually very understated in how they talk about the market, but a price of 200,000 yuan or RMB is actually a little over 28,000 US dollars a ton, and that's way over what anybody would call the incentive price. So this call by Li Langbin really started a spike in the futures. And if you look at stocks like Pilbara, which I am a holder of Pilbara, Pilbara, as I looked, was down overnight, but in the past month is up a little over 45%, according to what I'm looking at. It went over four, it's back down a little bit under four bucks, Aussie, and that is significant. Overnight, I also report that in many of you may have seen this already on social media, but Lion Town did an auction, and they got reportedly $1,254 on an SC6 basis. Hanochord's new price deck is very bullish. JP Morgan came out with a relatively bullish report not too long ago, but Hanochord's numbers, and I'll quote the exact figures, are remarkable. The only disconnect I would see that when you look at the spodumene prices, they talk about for $26, $27, $28 versus the carbonate prices, I actually think either the spodumene is too high or the carbonate is too low, given the standard ratio for what a converter volume that the converter needs, plus the cost of conversion. I think there's a little disconnect there, but I would have to talk to Hanochord to see what their logic was. In any case, higher prices, both for spodumene and lithium carbonate, are expected. I've been saying this for a while since I said lithium winter was over, but I also have said very clearly that I thought it would be a long, wet, cold spring, and the price would go up, but it would be very gradual, and that kind of remark is always subject to scrutiny and revision. I've always said calling price, especially lithium price is a dangerous game. I have said that I thought by this time next year, the prices will be at the incentive levels, and there's different versions of what incentive pricing is, some say 18, some say 20. In any case, it's a lot higher than it is today. So let me give you the canna cord numbers. I'm going to give you the lithium carbonate minimum 99% to US dollars a ton, FOB South America. Their old number for 2025 was 86.35. Their new number is 88.73. In 2026, they call for 16,000, and that's up from their old forecast of 11,214. 2027, they're at 22.5, up from 14,714. And then it drops in 2028 to 18,421 from 14,714. If I look at their Spadgemein con, 6% US, FOB Australia, their 2025 number is now 823, up from 793. Next year, they have 1,600 up from 875. The following year is 2250, up from 1,100 previously, and their 2028 number is down back down to 1750 from 1,100. And those are numbers that the industry can live with, in my opinion. And you know, it's one company's opinion, and forecasting price is a very challenging game, but I think it's a great sign. And I think what Lelang Ben said is so significant, simply, and I'm repeating myself a little bit here, but I think it's a very, it's a point well worth repeating, is that gangfins going off the reservation a little bit by talking about prices way. And I think the message to the rest of the China lithium ion battery supply chain is, hey, the lithium guys need to make some money too. CATL is taking a disproportionate part of the lithium ion battery supply chain profits. I think that's the message. And this is my interpretation, 100%. But it's, I think, well founded, and it's very clear, I think gangfins message is that this is what we're seeing, and this is what will likely happen as battery energy storage systems run. And that was what Mr. Lee gave credit as the kind of incremental demand driver. And I think that is a, probably all I need to say about this, I think there's a bullish picture out there, whether prices really take off beyond the incentive level, we'll have to see. But you know, as I've always said, it's really hard to predict the timing of lithium price changes. I have a very mixed track record myself. I'm sticking with my story that I think it's still a relatively slow rise, but I am happy to be proven wrong yet again. And just to go back to the growth of battery energy storage systems, Iola Hughes presented yesterday at this event, and she talked about best deployments, I think, being up 44% this year, year to date, and just a very bullish forecast. The level of increase is even more substantial in the U.S., and I think you're seeing, there's a lot of concern in the United States about the aging grid and the electricity demand because of data center buildouts. And this is a pretty universally communicated story, so I am not going to dwell on it. But I think it's a really important point that with all the negativity people have, especially in the Western countries about, you know, the U.S. EV buildout isn't as much as people had expected. I've never felt that way. I always thought EVs would be a tough slog in the U.S., and I think we're seeing that. But I also think that the way I frame lithium demand from battery demand is that you just need to look at the overall amount of battery gigawatt hours, now terawatt hours produced, and that lithium demand falls out of that. And the global picture is still very robust, so all the hand-wringing about the Trump presidency slowing down EV growth in the U.S. is really much ado about nothing. And I think the United States also represents a very strong potential upside to the whole EV story later on. Zelandes puts the producer first, remaining independent of any particular flow sheet or DLE choice. It's no wonder that over 70% of lithium brine projects are Zelandes customers. For more information, go to Zelandes.com. That's Z-E-L-A-N-D-E-Z.com. I continue to get a lot of questions about how I view the future of lithium production in the timing of lithium production in the United States. I received some videos from various members of the Lithium America's team last week, and they had a site visit in a board meeting. Thackerpass is coming along very well. I think you just have to look at the timetable they cite, but Thackerpass is happening. There's been a lot of naysayers about that project, which I think now that the US has taken their equity stake in the loans being drawn down, it's only execution now. It's not about financing. It's not about a lack of commitment from the administration to follow through with the loan. Thackerpass is all systems go. The smack-over has huge potential. Patrick Howard did a fireside chat here yesterday. To be clear, Patrick's been on the podcast before. He is with Exxon, and the big oil company mentality here is it's not like the juniors who have to keep making announcements and be overly optimistic about their timelines. The major oil companies that are involved in the smack-over are going according to their timetable. Patrick made some really interesting points that Exxon doesn't worry about the price. They focus on the long-term supply and demand fundamentals was one of his statements. Investments are time to long-term fundamentals, which they believe in. He went on to further say that this isn't a one-project scenario for Exxon, but they aren't also going to rush ahead until they have fully vetted the technology they want to use. Their number one priority is being on the left-hand side of the cost curve. I actually had Patrick clarify that remark to me after his fireside chat. He wasn't saying they were going to be the furthest left, but they will be, in their mind, well inside the first quartile. They're fully comfortable with that. They said they are doing their part to build out upstream lithium capacity. They also talked a little bit about what Exxon would like to see happen in the midstream. I think that's a theme I was on a panel myself. Sitting next to me was David Park, the CEO of Standard. David and I had been on a panel a couple of weeks ago, and I still hope to release that panel as a podcast episode when I get the file. There is a lot of concern about the build out of the midstream, meaning cathode capacity, probably the weakest part from a policy perspective when the US says they're trying to build a robust lithium ion battery supply chain. Cathode has certainly not gotten the attention it needs, but in order for there to be a market inside the United States related to battery, there has to be cathode capacity. Otherwise, Thacker passes lithium or Standard or any of the players in the smackover. That lithium is going to have to go to Asia to be turned into cathode if we don't do that build out. When Patrick was asked specifically about DLE in the fireside chat, his statement was the DLE is just one component of a system. They're focused on taking a hard look at all costs and stripping out costs in the process and stripping out costs in the DLE system. I am a believer in the long term future of DLE. I've made that pretty clear on this podcast. Obviously, the smackover is dependent on a workable DLE, but I think the Equinor Standard Alliance will get there. I think Exxon will get there. Chevron's much earlier in the game. The oil companies have the balance sheets to move ahead, and I believe they will. Timing, we still have to wait and see. Speaking of big balance sheets, I have had a fair amount of discussion here about Rio Tenno and where they're going with their lithium business. I have to tell you I have no real conclusions about that. I think they've made a huge mistake and blown a lot of capital at Rincon, but they're going to do what they're going to do. They have better assets than Rincon. They should be focusing on, obviously, they have stable production from the assets that came with Arcadium. What happens in the future? What's the future of the James Bay and Wabuchi assets? I simply don't know. I think that with the leadership change, it's been reported that Paul Graves is departing, and the new leader will be from the liven side of Arcadium. Obviously, reporting to the person is in charge of, I guess, its aluminum and lithium. I think Rio has just got to get their house in order as far as what they want to do in the lithium industry. All the optimism about whether these guys have the balance sheet and they can move forward, I think, is beginning to dissipate. When asked here, I think the global lithium industry would have been better served had that package of assets gone into the hands of multiple companies, because I think Rio is in a position capital-wise where they could develop them all on a timely basis. I just don't think they have the execution capability to do that, and I also don't think it's just with a new CEO, the capital allocation favors speedy deployment of capital in the lithium space. We'll see, but those are my thoughts on that. Like everything else, it's one person's opinion. This episode is also brought to you by MLC. Whether you need technical support for engineering or setting up equipment for effective use of Lyme, MLC is your solutions partner. Visit lymeforlithium.com to learn more. That's L-I-M-E, the number four, L-I-T-H-I-U-M dot com. And another question on the U.S. governments or the Congress's report on predatory pricing, which is titled, how the Communist Party, actually the Chinese Communist Party, manipulates global mineral prices to maintain its dominance. What did I think about it? I don't doubt that a lot of the conclusions are correct. I think I've been saying this for a long time with respect to lithium. I won't go broader than lithium, but I'm just going to read you some of the findings, just so you know what's being said. I'm not sure how many people follow what the U.S. government says about Chinese manipulation, but finding one, the PRC government subsidizes its state mining champions with tens of billions of dollars, including zero interest rate loans to support global acquisition of mining assets. One analysis shows the PRC government provided roughly $57 billion of aid and subsidized credit for mineral projects around the world. Finding two, the PRC legal framework governing mineral price reporting gives Beijing the ability to raise and lower prices in favor to favor its economic and national security interests. This legal framework effectively makes it illegal to publish prices that deviate from the PRC government's wishes. Finding three, PRC law effectively prohibits objective price reporting by price reporting agencies and international exchanges, including the London metals exchange. PRC law makes it illegal to manipulate a price index, but when the government decides what constitutes manipulation, prices must follow the government direction. The reach of the PRC's market information providers and cloud of its refiners means this government intervention ripples through global markets. Finding four, the PRC government has aggressively expanded its international footprint for price reporting agencies which propagate the PRC's manipulated prices. As the Information Center of Gravity shifts to the PRC, U.S. and Allied Market Participants will be discouraged from making investments because prices will reflect the PRC government's will not fundamental economic forces. Finding five, the PRC government maintains a chokehold over midstream refining relying at least partially on subsidies. While the PRC cannot control where mineral deposits are located, it can control where the resources are refined. Finding six, the PRC developed a set of tools to control domestic mineral prices. These tools included intimidating domestic producers into ensuring that prices went in the direction the government wanted. These tools would prove critical to controlling critical minerals prices. Finding seven, the PRC government engaged in a decades-long strategy to dominate rare earth supply chain and on and on. A lot of this is related to rare earths. I'll leave it there. In terms of reading from this government report, you can avail yourselves of it online. But I have said for a long time that I thought SMM and MySteals and those types of companies were literally mouthpieces of the party and I believe that to be correct. I don't think that that means these are bad people that work for these organizations. I think that's just the way China rolls and anyone who thinks that's not the way it rolls is probably on the wrong side of the argument here. But in the price discussions that I have had at this event, I think that CATL and BYD know that for them to have the raw materials they need down the line that global price is going to have to go up or a lot of these Western projects are not going to get developed. I've said it many times before. I'll say it one more time that I believe that CATL in particular, BYD to a lesser extent, will do what they can to manage increasing prices and to keep price from running in a crazy fashion like it did in 2022 when it moved through the 40,000 range on the way to 80,000-ish. And finally, I will make a comment on the headline from the West Australian IGO CEO says 1.2 billion Winana refinery won't make money even if it's fixed and lithium price keeps rising. If you have access to the West Australian, I suggest you read that article or go through IGO's recently released presentation. It's a sad story that IGO is contractually obligated to keep subsidizing TANCHI and TANCHI seems to have no desire to shut the dog down. And that plan has been a dog from the beginning. It's part and parcel to the caveat that when you make a joint venture or even when you go into a relationship, you have to be careful how it's structured. I would love to see IGO find a way to walk away or force TANCHI to buy them out of Winana, but that is not likely to happen anytime soon. I intended to keep this a 20-minute episode. I'm now over 25 minutes. So hopefully this was useful. I don't get that much out of these because one of the reasons I do the podcast is in doing the podcast. I learn while there's no and when I simply talk, I don't learn anything. So hopefully you got some benefit out of this. I do these episodes because I get a lot of emails that tell me there's a subset of my audience that really likes these short episodes where I just answer questions and talk about topics. But in any case, thanks again for listening. Go Buffalo Bills!