Episode 229: YJ Lee

Hi, it's Joel Aurey. Welcome to another episode of the Global Lithium Podcast. Today is episode 229. My guest is Y. J. Lee, a fund manager at Arcane Capital and Singapore. Y. J. Burst onto the Lithium scene a few years ago with a very bullish outlook towards demand and a very different perspective on how he views growth, which you'll hear about in the next hour. Y. J. has made the rounds of some podcasts recently and I think you're going to find this one is a little different than his other appearances just based on what we talk about. You're going to hear some of the same things if you've listened to a mouseware about his bullish demand forecast but I think we get into more granular detail on some projects and some other aspects of the business. I'm at Y. J. in 2023. You'll hear about that. In the episode I was speaking in an event in Singapore. Y. J. had just put out some interesting information on what he saw in the Wapidolite run up in each one and that's what got me interested in hearing his thoughts in the first place. And I have paid attention ever since. So without further ado, Y. J. Lee. Y. J. Lee, welcome to your first appearance on the Global Lithium Podcast. Thank you, Joel. This is an incredible honor. Well, I hope you feel that way in an hour. We always start out with the backstory. You are fairly well known now in Lithium circles, but I've never gotten the real backstory other than looking at your LinkedIn profile. So fill us in on your life today. Right. Okay. Not as well known as you for sure. Me, I was actually born in Malaysia, moved here to Singapore when I was about four to five, not by myself, of course, but my parents moved us here, grew up here, did my two years of a national service and my 10 years of visa training here as well. Starts at my career as a sell site analyst and ironically, I was covering the other side. I was an all-end guest services analyst covering those stocks that listed in Singapore. And that for about six and a half years along the way, very fortunately, one a couple of awards, kind of like ranked number one analyst in that space for two years. And then moved on, did a few businesses in the middle and then joined this company called Arcade Capital Advisors. And this is where I started learning everything about renewable energy, which of course brought me to Lithium. And then in 2024 and the middle of 2020, we started this fun, this new fund here that we call the Arcade Green Metal Fund. So that is the first green metal fund in Singapore. Yep. And that's where I am right now. How far back is your first real look into Lithium market? When was that in the early 20s, the late teens? I would say mid-2010s, around the time I joined this company that was maybe 2017. Before that, knew nearly nothing about Lithium and still no way to let it go about it. Was not easy sitting in Singapore to meet a lot of Lithium people. Well, let's just say that's not a single mind of any mineral here. Yeah, I've taken this little time. It takes to drive across the country many times. So what you know, you want to learn about Lithium, if it was 17, it was right in the middle of one of the cycles. What was your process to learn about the market? I had no teachers, I had no real databases to fall back on. I literally started with a blank spreadsheet. I wrote the word Lithium. I typed the word Lithium and then albumile. And then I started listing down every single Lithium mine I could find. So that spreadsheet grew from 60 plus mines that year. And eventually, I started looking at the Chinese. I started looking at Africa, Australia, all around the world. And then today I've hit about 142 mines on that list that are controlled by I think 106 companies. So I think that more or less covers the space. Yeah, if you go back to 2017, that number was significantly smaller. There are a lot of things in development. But in 2016, there were only two mines operating in Western Australia. And that was Greenbushes. And then Mount Catlin restarted after it. It's first a few years. It didn't go so well. You're learning about Lithium. Well, I met you in 2023 in Singapore. I spoke it the event they have there and I think it was late March or early April. You had come to my attention because you had posted your analysis of the little Piddle Light operations. Ah, that one. Yes. Okay. And I think it may still be pinned to your ex account. Well, I got to take it off. Because I can remember when I spoke I looked out in the audience and there was a pretty big crowd. It was over a thousand people. But I saw you said, well, my buddy, Arcane Capitol. I think I use that in one of my slides at time just because that was the big question. Marty. And I knew where all the little Piddle Light was from the time I lived there. It's just nobody. Gangphen used to talk about it. Yeah, maybe we're going to develop this mind, but it never it never made sense until the price ran. I can remember that your analysis got a lot of people's attention just because there was nobody else. There was no data from anybody else. If you weren't in China. And somehow connected. You were going to have a hard time finding out. You didn't even have names. It was all numbers. And yeah, you started your fund, the current fund you're managing in 24. Did you say? Yep, middle of May 2024. I read earlier this evening before we started record that after fast markets last year, you took the percentage that was in lithium up from 28 to 39% and that probably proved to be very good timing for you. Yep. So so what happened was, yeah, so I was speaking at that fast markets, lithium conference last year. And I thought that I would be the only bullish voice there. And turned out, yes, most of the big banks and brokerages, they were very negative. They remained very negative on the market saying that there was going to be an oversupply through 28, even 32. But then I heard a number of smaller names, you know, consultants, independent guys saying, yep, this market is likely to flip faster than most people think. So I was not the only guy seeing green shoots. And when I came back, I looked at and I was thinking about it price was 8,000 a ton, two thirds, you know, of the producers out there were not making money in a sector that's growing 25, 33% per year. Didn't make sense at all. I had I had to think that that was the bottom. So when I came back to Singapore, I put like you said, an additional 10, 11% each points on the portfolio into lithium calling the bottom right there. And you know, and we all know how these things go from the bottom to the up just even 10, 20% the stocks themselves double. And that's that's what we expected and that's exactly what happened. Well, if you go back to 2022, a stock like lithium America's who at the time that could pass wasn't approved yet, Couchari wasn't really that close to operating in the stock was in the 40s. And now, backer pass is being built. Couchari is the biggest single lithium operation in Argentina. And when you add the two stocks up, they're probably around 11 bucks right now. So it doesn't always make sense. Well, that's the strong market. That's what we play in. I've listened to you multiple times. Maybe the when you came out with 4.6, you got a lot of role, rolling eyes at that. But what you said made sense. When you start looking at what happens when trucks start using so and we're going to get into all components of your bullish forecast. But it fascinates me that the biggest lithium company in the world who really should have the best window into the market perpetually seems confused. and I say they should have the best window because when I would, was running Asia for FMC. I probably only had three guys besides myself talking to people, Bo-newo was coming. We were seeing the cathode plants get built, we had cross-check the information, everybody exaggerated, so you gave that a haircut, but there was a process. So when I see album-roll slides and they say, well, it could be two point eight, it could be three point six and it drives me nuts because certainly can track how many batteries are being made and how much cathode's going into them. And it just seems to me that as of, I don't know how many people work with you, but as somebody that doesn't have that granular knowledge from being in the industry, you seemingly do a much better job of deconstructing what's happening. Thank you. Then they do. I would say that album-roll probably also has an incentive not to talk up the lithium market too much, keeping potential competitors out in the long term maybe. I think that was true when you started. Maybe. Yeah. I think that ship has sailed. And I think. I think. I'll be back now. Yeah, I think that any thinking person, yeah, I mean, and I believe what you just said, it was absolutely true. Esquieu, I'm used to do the same thing. They were always talking it down and trying to discourage it. And, you know, now we all complain because CATL controls the market narrative in China or CATL and friends. I don't know how you want to phrase it, but we can get into that a little bit as well. So let's talk about what is your most current demand number for 2026? 2026. Well, I'm looking at two million. Two million tons LCE. Yeah, and the interesting thing to me, 'cause what was your number last year? One four or one five? One five. One five. Okay, so you've got essentially the growth this year. 33% last year. It is double what the entire market was in 2018. Just the growth this year. Oh yeah, so absolutely. Yeah, because the market didn't hit 300,000 tons until 2020. You can debate that, but let's just round it off. It did. Thereabouts. So, no. I'm not changing. I actually have not really changed my demand numbers in the last half year. I think I'm high enough. And 1.5, my number for last year 1.5 was met. The two million ton number that looked high from the middle of last year. Now we've had both Chairman of Gunfeng and Tianqi come out to say that this is the number, right? Well, let's talk about that for a minute, 'cause I actually had a guy from Gangphen on the podcast in December, and that was one of the things we talked about. It seemed to me, having knowing Lee Langman since 2002, so almost a quarter of a century. Gangphen never talked like that. It was always very conservative, very, we're just following the market. And to me, and I'd like your perspective on this, but what I was hearing late last year when that statement was made was pretty much a, we're gonna go against the CAT on the narrative here, because we need to make some money too. And when the two biggest lithium companies in China have lost money more often than not in the last five or six years, something's gotta give. And I think it was, I thought it was a ballsy move when Mr. Lee came out and said, hey, the price could go to $200,000 RMB, 'cause he said $150,000, and then he upped it to $200,000, the way I read it. And yeah, then I guess Tianqi came in behind him and made similar remarks. Yep, and well, he was absolutely right, right? The price did go there even if temporarily, and now it's stabilized at a much higher price than it was when he made that statement. I think in this environment, everybody needs to make money. And I think the Chinese understand that as well, yes, the CATL may want to push down their input costs and they have successfully done that, over the last few years with their lipidol like mine, by introducing that extra few percentage points of supply that crashed the market and brought down the cost of the other 90% of their purchases. But that's-- - Yeah, I mean, I've been saying that for-- - Yep. That's how it works. - And the lithium guys, Gun Fun Tianqi, yeah, they all sucked it up, right? And took the pain, but now they want their money back. Well, also, when they can't keep, you can't keep putting money into Argentina, in Mali, in other places, if you're not making money. - Oh, yes, for sure. - That's a, that was always fascinated me and go back 20 years, 'cause the percentage change in the cycle that happened from 2005 to 2007 was actually greater than what happened in 2015 to 2017. But nobody was paying attention back then. - Yeah. - And, you know, when they were developing the Western provinces, those banks were loan and-- I mean, all those guys were losing money all the time, but they kept getting finance when they were building conversion capacity. And it happened in Sichuan, it happened in Jiangxi, it happened in other places. So, but now you've got a situation where CATL, we have never had one entity have a piece of the market like CATL has. - Yep. - I mean, it's just astounding, 'cause I was in there one gigalot hour factory in Qinghai, over 10 years ago. And nobody even know who CATL was, 'cause it was ATL, was the big brother, and now he talks about ATL, nobody. Let me ask you one other question about, you got your 20, 30 numbers there on your screen. - Sure. - Is it 4/6 or-- - That's not changed. - Yep, okay. - Okay, you're saying. - Yep. - All right. Now, let's talk about the components of that, because, you know, let's break it down, because the thing that you're saying that I really appreciate is that people need to stop being fixated on just EVs. - Well, sure. - You got EVs, you got trucks, you got all their sorts of transportation that we haven't really seen fully developed yet, and then you've got energy storage systems. And I said in 2010 that EVs weren't even really a thing that I mean, the leaf was just out, and Elon was making roadsters by hand basically. But when we looked at the future, I already believed that I said by 2025, energy storage systems would be bigger than EVs. And of course, I was wrong, but that trend, it's gonna happen. And even a couple of years ago, if you said that people said, "Oh, you know, that's nothing." And I don't know what you think at a crossover point is, but-- - Mm, okay. - Is there a crossover point in the near term-- - Not near term. - Yeah, I don't know, it really, really depends on how much you think best grows, but actually I am very, very constructive on EV. I continue to think that EVs will be the largest chunk of the market. Best, yes, went from nothing in the market to something significant this year, last year and this year. I think last year, the installation numbers were, my my forecast was 325 gigawatt hours. I think the actual number was maybe 315. So I'm sticking with my forecast, not changing that. And through 2030, I think the world installs one and a half terro watt hours of batteries for best, both grid, commercial and home systems. And that probably consumes about maybe 1.1, 1.2 million tons of lithium. I think that's still behind what EVs probably do. - Yeah, I was really thinking more towards the mid-30s, not 2030, but-- - Oh, okay, mid-day. - Yeah, I don't know if that's the far, only 2.3 third. - No, I think if you look at the trends, I mean, the best growth is faster from a small base and yeah, you can debate that. And as long as you don't count, trucks is EVs. - Oh yeah, I know, yeah. - Yeah. So tell me about trucks. Trucks, very, very interesting space. So this is something that not many analysts are looking at closely yet, but because that's a really small still. It's probably where best, both a few years ago, of the radar essentially. But what is happening in China is very, very interesting. So not many people know this, but as of the middle of the year in June last year, the EV penetration rate for heavy trucks in China was already about 22%. And by the end of the year, we were looking at nearly a more than a quarter, we are coming close to a third of all heavy trucks in China going electric. And CATR has made it very clear. They want to push heavy truck penetration in China to 50% by 2028. This will grow big. And it's not just the Chinese market that will see these sales funny enough in Singapore. I saw a garbage truck that there was electric. I saw the batteries. I was like, what? And then I went around the front of the truck and I saw a BYD logo. So that's where things are already. And I think trucks go from last year, there will be 50 kilo times LCE of demand. It will double up very, very quickly because of the high adoption rates that we are seeing. And by 2030, I have a fairly bullish number, assuming 2.5 million medium and heavy e trucks sold around the world with an average battery size of 340 kilowatt hours and a penetration rate globally of 1/3. That would consume about 630 kt of lithium, which is half of the 2024 market. Big numbers are out there. It's how fast it happens. And I think you've made people think it can happen faster. I stopped talking about how fast I thought the market was going to grow simply because people were so negative. It just wasn't even worth arguing about it because it's going to happen when it happens. It's very easy for the banks to take the herd mentality and nobody wants to break out for more than a couple of degrees off of what the next guy is. And that's why I've appreciated your willingness to just say, hey, look at it. So what happens with many of these forecasters? They forecast linearly. They don't dare to forecast exponentially, which is how the world actually grows. With the most specialized team of lithium-brime professionals in the world, Zalandas is dedicated to providing exceptional customer service and support throughout every stage of lithium-brime field development and production. From the out of Comra to Ambrim Huerto to the USA and Canada, go to Zalandas.com for more information that's zelahndz.com. We got the demand side taking care of them. Let me go back to the fun piece of this for a second. Right. You're looking at lithium companies. How are you picking winners? Oh, okay. You're not going to want my trade secrets. There's a process. Yes, there is. There is a process. Yeah. But I don't think you're following the same path as everybody else. I think you do think a little bit outside of the box. Yeah, maybe. So I mean, I approached this from a very high level macro picture and all the way down to the individual company levels. So that's how I do it. At the high macro picture, I try to see the full industry, size, players, actual minds that are producing how much each of them produce. And that's my supply side model, the 142 mindset attract. And that gives me a lot of confidence in understanding how much supply can actually come to the market in a given year. Minds are not things you just turn on and off with a switch. The key times, leg times, are long, multiple years, especially when we are talking construction. And delays are more the norm than the exception, which not many people are willing to forecast in their model. And then like with this cast, I also have this big demand model, which yes, I'm on the high set for most things. But in the last few years, the numbers have been more or less there. Correct. So I'm not changing things. So that's the big picture view. Going down to the individual companies, then with that supply model, I know which companies, I've done the research, I know which companies have real volume growth potential. So companies that can scale up their operations within the next five years, with a reasonable amount of confidence, product quality has been proven to be good. The asset quality is good. Management quality is good to me. That's very, very important as well. I've called out a few companies on X who have filmed this criteria. And then I do a DCF, a discounted cash flow on each of these companies that I want to invest in. So I model out the entire lifetime of the mind, the eight or 40 years. And I use a really high discount rate. Essentially, you know, the market likes to use eight or 10%. I use 14 to 20%. And on that DCF model, I still manage to find companies that are trading less than half of their discounted cash flow valuation. Essentially, I'm buying 50 cents on the dollar of value. And that's when I go in. How do you factor in things like contract mistakes and companies that the data is out there? And I used to publish it. I used to publish the export statistics and say, why is SQM get twice as much? And it has Abel Marl from Chile. At one point, I put it, the numbers buy port. And then SQM came to me not to do that because it told customers too many things. Because this is when Japan was still an important part of the calculus. How do you qualitatively make adjustments? There are some management out there. Proven time and time again, they make the wrong calls at the wrong time. I'm not going to say Abel Marl on the podcast, but. Well, in those cases, I might actually use a higher discount rate than there appears. And the way DCFs work, even a one single percentage point increase in that discount rate can knock off a significant amount of value of the number that comes out. So once I get to the mid or the high teens discount rates, that values are dropping really, really quickly. Yeah, back when I started doing that kind of work in the 80s, the company I worked for as this count rate was 15% for internal projects. Yep. Well, and that was before people talked about EBITDA too. So. Yeah, yeah. Now you've been in this eight years, nine years. I'm assuming that there's a naughty and nice list to some extent. Yes, there is. On my screen, there is a little segment called the censored list for management, egregious, unforgivableness. And that list runs to over a dozen names now. When you look at what happened in Africa in 23, 24 after China said, "Okay, we have a problem this album and we're just going to go dig stuff up." And I think you hit it on the head. It's hard to forecast long-term when people don't do mind plans. But where do you see. If you're looking out at the future, where do you see Africa? And obviously Africa is a very complicated thing just like China is. Now, we try to tell people China is more like Europe than it is the US in terms of. There's a lot more differences across the country, whether you're talking about language difference. America is not really homogeneous, but it's a lot more homogeneous than. In China by far. Yeah, yeah. But Africa is. there's a naughty and nice list of countries in Africa as well. Yes. How do you put that into your calculus when Africa is really serving as swing supply to a large extent? For Africa, the way I think about it, I don't really think of. Well, sorry to put it this way, but I don't really think of them as individual African countries. I tend to think of African supply as mostly controlled by the Chinese. Well, who go in in a big way and because they are the Chinese with their economic, industrial strength, they know how to work with the Africans. And so they manage to do a lot of things. things that bring up the supply up a lot quicker than most Western companies would be able to. And for the African space, honestly, it's very, very opaque. It's hard to see where the mines really are. I found out a number of players simply by some weird offhand mention in some Chinese sources. And then suddenly, oh, there's a new line on my model. Yeah. And these came on really, really quickly. I understand it. In the last cycle, the African supply, plus lepidolite over supply, that was 22 and three. What happened was the Chinese went in. They found out crops of lithium and they just started mining. They just started digging it out and shipping it out without even spending much time on drilling, proving the resources or even coming up with any long-term defined mine plans correctly if I'm wrong. That's the way I understood it happened. And that's how that supply came online. But I don't think that's a very sustainable method going forward. So I also hesitate to forecast too much new supply from Africa in this half decade. Yeah, I think when I had Daniel, him and his on towards the end of the year, we were talking about what what can Africa do and, you know, it's like we don't know, but maybe it can do 20, 25% of world supply at some point, just based on the fact that there's a lot of assets there. But I'm not I'm not banking on it. The other point, and I've talked about this, but I think you have as well is that. And I initially called what CATL did with the mine in each on a party trick because in an 850,000 ton market, wasn't that hard to swing and lithium still a small market and you can have a big shortage when you're a few points under and you can have a big oversupply big being in quotes. Since this is a not a video podcast, I'm doing air quotes. But how do you view CATL's ongoing ability to manage price? I think they are milking it for what it's worth right now in the last cycle and in the current cycle as much as they as they can because they also know that logically they're going to lose control of the input price very, very soon. Like you also pointed out that JNCR War mine has a capacity maybe equivalent to three to to some say five six percent of global supply. I mean, that's the name plate who knows whether actually we'll produce that much. But three to three let's just call it three to five percent of last year's market. And then we are talking about an industry that's growing 33% this year. It's growing 8% every quarter every three months. So in in the space of the last six months that this mine has been closed, the real lithium demand has grown by 16% versus what they can bring on as supply three to five percent. So this is this will become a non issue very soon. Yes, the market, the stock lithium prices and stocks will fall when CATL announces and we've got permission to restart this mine and we're going to do it right away. But I would then view that as an entry opportunity. Oh, absolutely. I think what you've learned in two or three years, the run of the middle analysts will have figured out. And that would be that yeah, that game was brilliant when it was first played. And it had the backdrop of ridiculously high spot price to to undergird it. Now you've got to take the market's turn, but it's still in reasonable territory. And I said this two years ago that I said CATL knows very well that the price of lithium has to go into the 20s for the industry to be healthy. And they know that's going to happen. But I think it's what you just said is that they're not in any rush for it to happen. They know it's going to happen, but they'll control it as long as until they can't. And I think we're there. The last sodium Ion announcement had a lot less effect on people's cycles. I mean, you can't just keep dusting off the sodium Ion story every time you want to see price drop. I don't think they've totally lost control, but I think you can see it from here. And I think, and again, I've been saying it for two years that they know this very, they're very smart people. Yeah. Yeah. Well, in December, they would they made an announcement or they might have leaked to the market that they told their mind workers to essentially form up and get ready for the restart, right? And there was two months ago. And how many times can you cry wolf? I think they'll keep doing it until people stop reacting to it. And I think fewer and fewer people are reacting to it. Yeah. But let's go back on the stock side though. We saw this equities run up, get a quarter ahead, two quarters ahead. There was a significant rise. I can remember when when it was announced, you know, the Dale Henderson had put a bunch of money into Pilbera stock at a very good time. And I said, well, I didn't put as much in as he did. I was originally in a 30 in the low 30 cent range. And you know, I hesitated to add to it. You know, when it was getting higher and then when it said, if it's good enough for Dale, it's good enough for me. Yep. Yep. Yep. He timed it perfectly. Stop markets are always forward looking, right? And sometimes they're wrong, but to a surprising extent, they are usually right. I think that this year we are headed for a small deficit even or or I have a deficit number that could vary between, you know, 60 to just over 100 kilo times LC this year, depending which inputs you use. And I think it becomes nearly impossible to forecast an exact price in a deficit situation. We saw in the last cycle, it went to 80,000 USD a ton. This we think that 20 is a reasonable number, but the market always surprises us on, you know, on a high extreme. It's fascinating. And I can still give you data that shows that 2023, the average price paid for Lithium was higher than 2022. The spot price is coming down because if you take the top Lithium companies and just go back and go through the data because of the way contracts ran because the fact that not that much was selling at 80,000 overall, you know, I think I've heard you speak about this as well that I always used to say, and it's much less the case now, but SQM's quarterly price used to be the best indicator of what the global price was. Yep. And they didn't play games like Abel Marl and never really say what the price was. Take the revenue and the LCE and divide it because they were very, very clear. The only thing you didn't know exactly how much was hydroxide and carbonate, but on an LCE base, you knew the price. Yep. And I still think that's a good indicator. It's just not as good as it used to be because now you got the whole Australia thing in, you got Spod, you mean, you got the sulfate that's going to China. So there's more variables in SQM's story than there used to be. But 2023 was higher than 2022 and nobody talks about that. The only reason I make that as a point is it's the lithium story swings more widely than other industries because it's still opaque. There isn't a lithium price. Yep. And the GFEX is not the lithium price and whatever the price bots not the lithium price. And there's a multitude of prices out there. Start talking about it's just like iron ore. No, it's not. But I think what the market has come to learn is to follow the GFEX price and we may not like it to be that way, but markets certainly reacted and learned to react this way. That's true right now, but I don't think that's a long-term construct either. I'm hoping that the industry grows up and there's some more tools than the tool kit. Than just, yeah, than just that. Yep. 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 Lyme4Lithium.com to learn more. That's L-I-M-E, the number four. L-I-T-H-I-U-M dot com. Do you think it's possible that your demand story is so dramatic and the ability of lithium companies to bring projects in on time is arguably terrible. Why couldn't you have 80,000, 90,000 spikes in that direction? I don't think whatever happens, it happens for that long. But when you take all the fundamentals here, it's setting up for the potential. And then you can say, well, then best will crash because everybody won't go to sodium ions. So good. Yeah, but after prices go up to 80 or 100, right? So I mean, I would never rule out prices going stupidly high or stupidly low because we are humans. And there are traders in the market that profit from both directions, right? So they will take it to an extreme one way or the other. But fundamentally, I'm looking at, based on my demand model, getting to 4.6 in 2030, this industry is growing 500 to 700 kilo tons every single year. So 2024, the lithium market was 1.2 million tons. 2025, it was 1.5. Those are confirmed numbers. So industry grew 300 kilo tons in a single year. This year with the rate that best is growing. And we have confirmation from Gunfeng and TNT Chairman that the market is going to be about 2 million tons this year. That's a 500 kilo ton growth this year. And the way things grow, the way markets grow and these markets grow because of real products being produced, right? And we can talk about them later. It's going to grow at an accelerating pace. You know, the percentage growth rate may slow, but the apps look down. Yeah, the kilo ton growth increases. So I'm looking at 2027, 530 kilo tons, 2028, 700 kilo tons of growth. And then we take one step back and contextualize the whole thing. The market was 1.5 million tons last year. We are talking 500 kilo tons, 1/3rd this year. We are talking 700 kilo tons the year after we just nearly half of last year's supply. Can the world's lithium mines bring on half of last year's supply on in a single year and continue to do that for three years running? Let me ask you a question then. How long has it taken Zijin to bring on three cues? If you're having growth that's bigger than the entire auto-coma production base, it's a perfect storm. It is. It is. And CATL, like you said, will lose control of the narrative because demand is growing. So quickly, people want to stuff batteries and containers in ships and aircraft in trucks in buses in cars. There's not only enough lithium. So that's where we're going. We've had two situations where high prices, fixed high prices. I think it's harder this time. It will be harder this time because we are operating off a much, much larger base. Yeah. You're just too agreeable. I'm not challenging you enough, right? But I've always been criticized as just being a perpetual bull, which isn't really true. If you go back historically and look at what I've even put on LinkedIn, my demand numbers were sometimes lower than even the big eye banks. But I looked at it through the lens of it's like how many angels can dance on the head of a pin argument. Is demand really demand when there's no supply? Yeah. Yes and no. I used to cap my demand story by what, you know, I said, well, okay, there's no supply. Maybe it's demand. Maybe it's not. This was in a world where the big battery uses were held in your hand. Now it's EVs than trucks than other modes of transportation. I mean, the the made of the mist that takes people to the edge of Niagara Falls is battery powered down. Those boats, boats are battery powered. So think about shipping. We agree on that so that's getting boring for us to keep agreeing with each other. Let me ask you, we just had Admiral Marl Bale on Queen Anna. They probably should have done it a long time ago. But West Farmer's in SQM seem to be doubling down on their reconverter, so that's an interesting juxtaposition. But it is hard for the West to compete building conversion capacity. I think everybody can agree on that. Anything that's in WA is going to be a lot higher cost than China. I mean, that you don't have to be very smart to figure that out. But when we have somebody like Tesla's got their converter in Corpus Christi, does that mean anything? That's the question. And do you see is the lithium world going to go to China just controls hard rock because they're the only ones that can build conversion that makes any sense? And Brian is a different story. There's a lot of people that can can build Brian projects and make usable chemicals outside of China. You know, the thing you probably know this, but nobody in China could sell to the first tier battery industry until after 2010. Nobody. The Koreans and the Japanese wouldn't buy Chinese material until pretty, pretty late in the game. It's not that it can't be done in the West, but with conversion, it's a little different story just because it's the capital intensity game is is to tilde the Chinese favor. Well, everything is to tilde in the Chinese favor. I don't believe Brian is name your Chinese company that's operating South America and they do it substantially lower cost than. And because I started going to Ching Hai 25 years ago and they were supposed to make every year. It was going to be we're doing 50,000 tons next year. We're doing 50,000. I heard that story for a couple of decades before it came true. It's garbage, Brian. It's tough to process. I have experience with it. So it's just on a resource base. China has no real natural advantage other than the willingness to fund projects still significant. Yep. Yes. Yes, you've got the Chinese will go and build why the Western guys are so we want to be sure it's going to be 20,000 a ton for. Yeah, cost for them it doesn't work at prices lower than that. I mean the entire Western supply chain is going to be too high cost. They're trying to break away from relying on China. Yes, I can see the strategic reasons for that. But essentially the Western car manufacturers, everything that uses lithium batteries, they're just going to be higher cost than what you can get from China. And unfortunately that's the entire Western supply chain down to the mines down to, you know, thicker. Yeah, I don't think that the whole security initiative is going to do more than then build a couple of secure high cost supply chains that satisfy some defense people. The US can have a subsidized supply chain. It's just not going to be very significant. You can do that for defense. I think that can probably will happen. The Western rate of return needs just obviate anything but China control in 75 to 80% of this market and perpetuity in my mind. Yeah, but I mean, as an investor, I look at return on capital, right? And what the Western companies have to put in to develop anything from mines to convert hers is just, it's just stunning to me, right? Sometimes they have a capital intensity of what 50, 60,000 dollars per ton. That's insane. I mean, the Chinese are doing it at, um, well, if you do an honest accounting, I think going out with probably more than that. No, because you did well because you have to count the mines. I mean, you have to factor in, you have to do an apples, the apples comparison to. Yeah, but then again, we look at the entire Western supply chain. Like you say, um, if I think the market is 4 million tons, what, what's being produced in the US right now is less than a percent of it. Less than 5,000 tons. Maybe it's 49, 50. I don't know last year. I'm thinking even with thicker parts operational. In order to just meet defense needs, you got to have Thacker, you got to have some of the smack over long term. If you want to say what you have to define what really strategic is, the US knows it can't be totally dependent and won't allow itself to be totally dependent. So you will will have Thacker Pass and Thacker Pass is it'll be much bigger than 40 10 years from now. The smackover still has to let me hear your let me hear your latest thoughts on DLE because DLE no DLE no smackover. Yeah but which DLE project has proven to work pure DLE I mean so far Aramette is the only pure one that's out there. Well you don't see let's wait and tell you see real export stats consistently before. Right Aramette declared victory but I'm still saying yeah it's operating but okay I don't think you can call it in a shared success yet. Yeah and I've seen no other project actually come to commercial success yet it's still all to me nearly a black box. Okay I believe it will happen but it's you well know it's bespoke and well success in one place doesn't mean success somewhere else because it's got to be customers. Yeah exactly and and the other big project that's got financing Falcon. Don't get me started. I had a good laugh about it on X right because they were raising more money than their entire market cap and at first they were telling the market oh okay we've got this geothermal side that's going to produce electricity and heat and stuff and then that's going to produce cash flows and and then in the latest announcement it goes oh sorry all those are internalized. Oh okay so you guys managed to under so so severely underestimate the amount of electricity that you would need for your TLE what else been wrong? Yeah I'll just say it here I don't think Vulcan happens you know I can get some hate mail I don't care but the EU is by differential making America look good right now and look at the space. I'm a firm believer in that could pass and yeah it's it's it's higher cost from a capital perspective for sure but yeah they're there are reasons for that I believe that will be producing no and I don't know yeah it probably will I think the world needs a little bit more balance than the Chinese having 90 plus percent control over this and that other mineral is it's it's all got a little bit too lot cited as well. We've been talking for a while what did I miss what didn't we cover what do you want to ask me. Do you think sodium batteries come to the market in a big way? Some say that it's very very easy to repurpose lithium battery production lines to just use sodium inputs and then that could take over a very large chunk of the battery market in a much shorter time than people think. I am not deeply immersed in sodium battery technology enough but from the conversations I've had with people who are I don't think that happens. I think sodium will find a place there's enough energy around it and I think you've said this in places out in the desert where it doesn't matter how much space you use there's use cases for everything. Yep but if you go back five six years there's an oh sodium is going to just gut lithium because it's cheaper and this is well there are technical issues with sodium ion that have not been resolved and if you look at $25,000 lithium lithium ion still looks pretty good. You have to have a really high lithium prices to start making the sodium case and you don't have them for long enough. I think sodium remains niche for a long time. I can't I can't talk about what breakthroughs are going to happen five seven ten years from now but I've been around long enough where I've been reading about all these breakthroughs year in and year out for multiple decades that never happened. It's just like hard rock in Quebec. Yep but well there's some real progress being made there finally. Well is there let's see. Oh wow okay yes I think I think something's happening there in a few companies could be worth a real look. Well I'm not saying there aren't good hard rock assets. I know there are what I'm saying is when you put the Quebec government and the costs and how long it takes to build it's the mass deal the announcement about the mass good from real. The mass has been out there for two decades. Yep yep I've been to a booty multiple times. Yeah I was at their old plan and she went again that didn't happen. I'm very cynical about I guess that's a big surprise but I am very cynical about Quebec becoming a big lithium province and part of it's just because of the the structure of the government and the costs and prove me wrong that's fine. I don't mind seeing what I've seen over the years. CATL tried CATL bought an asset and came back what happened there. It's in other hands now. Well what about what about lithium resources that are not in Quebec? Ontario has some things that are possible. You have to build the conversion capacity too otherwise you're just building a spodium in mind to ship the China and that's not really the use case you want. That's why Brian is a better option in a lot of places. Yeah but if you have DLE in the smack over and I don't think you're going to have to have 20 varieties of DLE in the smack over because you have a Brian that's fairly consistent. So once you have a win I think you're going to have a bunch of wins. Yeah and the capital cost is going to be high but the op-ex aren't going to be they're not going to look that back start putting the cost curve together. You take some of these higher cost mines in Canada. If you're going to build conversion in Canada I pick the bride in in the smack over any day. Yeah but very enough okay but joe politically we are seeing Canada start shifting a little bit away and getting a lot more friendly towards China. No that's fine but then you're not building an independent supply chain. You're just not know how to do it anyway. You're just feeding the beast. Well yeah you know we're China got their technology to make hard rock. It was from the United States of America. It's just unfortunately those guys are all dead now but yeah but I mean this isn't rocket science but it is the the cost thing is you know that's well but just like China's favor for just like LFP came from America in the first place but then the Chinese made it big and now they're making improvements on it. Yeah it's hard to beat that. China is an overnight success after 25 years of building. Exactly. Yeah. To me the missing element in the whole argument is yeah they have lower costs but they also have been at it for a long time and they weren't any damn good at it for the first decade. Well in our new know we need to export that technology back to Canada today. That's an absolute red herring. Sorry. I mean I wish Tesla's converter would be a success. I don't think it will be but I wish it would be because then it would just like okay we have hard rock conversion in America again. Because when I when I started selling it was less than an hour from where I'm sitting right now. It was mind here and it was converted here and it was better than the brine stuff. That's why I got adopted in the original batteries but that's an old story everybody's heard. I think we got to shut this down. It was a pleasure. I'm going to ask you a couple of rapid fire questions. Okay. What's the last book you read? Hell difficulty tutorial. It's a lit RPG series. Very weird. Okay. What's your favorite word in any language? Gosh. I don't know. Maybe I don't know should be my favorite phrase. That's a lot of pressure I guess. What's your favorite band? Oh. I'm revealing my age now backstreet boys. And what's your favorite sport? Ah. Badminton. Easy. Are you a badminton player? Yeah. I play every week. I'm not professionally trained but I play every week. Well I think we'll let that be the final word. Play badminton and prosper. Smash it in. Yes. Smash it in. Thanks for your time. It was a pleasure getting to know you a little better. Thank you, Joe. Great honor to be here and I still feel the same after an hour and a half. Always interesting to get YJ's perspective and in the last few minutes of the podcast. I did try to get into some things that maybe we didn't agree on because by and large I agree with his thesis maybe not quite to the extent on some of the demand items but it's very close. I am traveling from tomorrow and I'm recording this on Saturday. February 21st, I'll be at the BMO event for a couple of days and then I am going to Nevada to see Thacker Pass again and see the progress that's been made. I will give a full report of those discussions in the next episode. Thanks again for listening.