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James Connor and Joe Lowry - Where is the Lithium Price Going — Transcript

by Jimmy Connor · 3,382 words · 507 segments · language en · Watch on YouTube

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0:00hi Joe thank you very much for joining
0:02us today after being up more than 500 in
0:05the last two years to spot lithium price
0:07has pulled back significantly in 2023
0:10and the lithium price has been very
0:12volatile this year why have we seen such
0:15volatility this year in the spot lithium
0:18price
0:19well I think there's
0:20more than one factor one would be all
0:24the information coming out of China and
0:26I think as time goes on we're getting
0:28less quality information out of China
0:30and more that's used to game the system
0:34catl and byd have the most uh to gain by
0:38having lower lithium prices and I think
0:40they've got
0:41the country's analyst marveled into
0:45giving relatively false narrative on the
0:49other hand there are factual situations
0:53when they did end the decovid lockdown
0:56there was a lot of Chaos in the country
0:57in terms of uh
0:59what was what was going to happen from
1:02an economic standpoint going forward you
1:05saw the Eevee incentives come off and
1:08then come back on you had a ice
1:10situation where there was an incentive
1:13to buy an internal combustion engine
1:15vehicle because of regulations that were
1:17going to change July 1st that had an
1:19impact
1:20and then the supply chain is much more
1:24complicated in China there are a lot
1:26more players and there's a lot more
1:28willingness to buy low quality product
1:31and use it in batteries because they do
1:33have a very low end Market whether it be
1:36in EVS some people making ESS will
1:39literally buy any kind of lithium
1:41chemical that wouldn't be considered
1:44usable in a Korea or a Japan so China is
1:48much more complicated many more players
1:51and the other thing is
1:53in an industry like this that is
1:56immature
1:57you're now seeing inventory across the
2:00supply chain so you can have lithium
2:02inventory in the terms of battery cells
2:04you can have lithium inventory in
2:06cathode and that's got to be factored in
2:12so some years when they say well there
2:15was you know X hours gigawatt hours of
2:18demand it might have been excess
2:21production that's going to have to be
2:23worked off and that will pop up almost
2:26immediately in the spot price because
2:27the spot price is very sensitive but if
2:30we look at the narrative that the
2:33numbers you gave
2:34that really is with all due respect a
2:37false narrative about lithium price
2:40because the spot price isn't the price
2:42it's a price if you do a scatter diagram
2:45of import prices in the countries like
2:48Korea and Japan it's all over the place
2:50there's
2:51you can find any price you want and
2:53right now you can justify just about any
2:55narrative you want to give you an
2:57example
2:58people will say oh the price is back
3:00down in the 20s well if you look at data
3:03coming from Korea or Japan
3:06and people assume there's a three-month
3:09lag on a lot of these contracts
3:11why junior to date is the average price
3:14for lithium carbonate still close to 65
3:17dollars a kilo there were in if you look
3:20at the prices for June and that's the
3:22latest data I have I probably am able to
3:25get July now I just haven't done it
3:28but you had the price from China was 45
3:30the pricing Chile was 73 in June
3:34it's all over the place so
3:36I like to caution people that
3:40when you're looking at these metrics
3:43look at all the data and then do some
3:46analysis sqms Q2 average yield on lce
3:50was 34 bucks it was down from the mid
3:5340s so yeah prices are trending down but
3:56this whole sky is falling narrative
3:59is wrong because
4:01there was a price that was 80 000 but
4:04there wasn't a lot of volume that moved
4:05at that price
4:07Joe you bring up a very good point
4:09mainstream media always discusses the
4:11movements in the spa Market but the real
4:14Market is the long-term Contracting
4:16Market which takes place between the
4:18producers and the oems what's happening
4:21in the Contracting Mark in terms of
4:23pricing
4:25well I think if you look at data that a
4:28benchmark they now will they have a
4:31contract price number you will see a
4:34trend down if spot is trending down but
4:38it doesn't mirror spot because they're
4:42the contracts aren't all the same they
4:44don't all use the same metrics
4:47and let's be realistic I will still say
4:49that I believe that overall by the end
4:52of the year the price in 2023 will be
4:54higher not lower than 2022 and the first
4:56half data supports my assertion pretty
4:59well but we have to see what happens in
5:01the second half I could wind up being
5:03wrong
5:04but
5:06look at what the spot price is now it's
5:09still significant if you go back to 2020
5:12spot when there were spot sales below 4
5:14000 a ton in China or a cobra sold below
5:174 000 uh in 2020 which is now all Kim
5:21and now it's the sky is falling
5:24narrative when if you look at Benchmark
5:27date I think the low the loab is just in
5:30the low 20s and then it went back up to
5:31the 40s now it's back just below 30
5:36those are great prices those would have
5:39been considered miraculous a decade ago
5:42that nobody could have foreseen thirty
5:46dollar let alone eighty dollar uh spot
5:49pricing so I think the thing people
5:52really need to look at if you're looking
5:53at investing is
5:56what what's the cost curve look like now
6:00what type of pricing is the cost curve
6:04going to underpin
6:07and is my investment or my target
6:09investment on the right side of the
6:12Costco
6:1320 20 to 30 or 30 to 40 dollar range for
6:18pricing going forward
6:20is not just possible it's likely because
6:23of although a pit light being produced
6:25the low quality lipid light puts the
6:27cost curve up at 30s but as long as 5
6:30Jimmy from Australia is selling above
6:32three thousand dollars lepidolite's not
6:34the high point of the cost curve the
6:35high point of the cost curve is an
6:37independent converter in China
6:39buying spot your main and converting it
6:42from there
6:44so as you mentioned the price has been
6:47very volatile this year peaked out at
6:49eighty thousand dollars a ton in late
6:522022 I think it got as low as 30 000 a
6:55ton in 2023 and I just want to clarify
6:59where do you see the price going by year
7:01end
7:03I don't know whether China has the
7:07discipline to keep the price in the
7:10range that catl and byd and the analysts
7:14that are compliant with their wishes are
7:17talking about I think it could run again
7:22go up through the 40s into the 50s by
7:25the end of the year I'm not I'm not
7:27predicting that because I really don't
7:28care
7:29the companies I'm invested in do fine if
7:32the price is 20 they do fine if the
7:34price is 30. uh but what you're seeing
7:38the chaos in China because of all the
7:41African ore they're bringing over and
7:44what we saw was a lot of lepidolite that
7:48was being mined illegally it got shut
7:51down and then some of the look of like
7:52producers that were small had to go out
7:55when the price went below the equivalent
7:57of 40 000 a ton so lepidolite
8:01is great if you're if you're a brine
8:03producer if you're on the low end of the
8:06Hard Rock cost curve you you love
8:08lepidolite because it basically
8:09guarantees you that no matter what
8:12Morgan Stanley may say that you know
8:14price is going to go below the marginal
8:18cost it will go below the marginal cost
8:20in China it always has for short periods
8:23of time that is not a sustainable
8:24long-term Trend so I I agree with Morgan
8:28Stanley that it can has and may happen
8:32again
8:33but uh I that's not something that you
8:36do long-term economics on
8:39and when it comes to investing I don't
8:41expect you to name any names but do you
8:44see this pullback that we have seen in
8:462023 as a buying opportunity for lithium
8:50equities
8:51oh 100 percent
8:53if uh you look like at a company
8:57take lithium Americas and look at the
9:00high now they're in production they're
9:01about to split into two pieces uh
9:04lithium Argentina which will still be a
9:07multi-asset play and
9:10lack lithium Americas which will be the
9:12North American assets Thacker pass and
9:15I think they'll go beyond fact or pass
9:17at some point but if you look at what
9:20the high price was in 2022 and what it
9:23the price is today it's mispriced and
9:27and that's not that's just one example
9:28and it's timely to me I just did a
9:30podcast with the lithium Americans from
9:33Argentina uh about 10 days ago
9:36and uh so I'm I'm thinking in those
9:39terms but I I could I could name other
9:42names that I think are even Apple morals
9:45is a really good value right now and and
9:48I always used to say I would never buy
9:50Apple model stock and I've done really
9:51well getting in and out of Albemarle uh
9:55since Kobe began and I think again I
9:58think right now albemarle's Mis missed
10:00price as well
10:02Joe's strategic Investments by both oems
10:05and producers have been an ongoing theme
10:07in 2023 General Motors has invested over
10:10650 million dollars in lithium Americas
10:13Albemarle invested a 110 million dollars
10:16in Patriot medals and stalantis recently
10:19invested 100 million dollars in
10:21controlled thermal resources do you
10:23think this theme of securing the value
10:25chain will continue into
10:282024 I do I think it's a long-term theme
10:32now and you know you didn't mention
10:34albemarle's attempt to take over lion
10:36town but that was a that was a large a
10:39very large number and uh lion town still
10:42independent I I do think and I think
10:46you've heard whether it's Rio tenno they
10:49said they're going to be cautious but uh
10:51they're they're interested it's it's
10:54obvious uh that you've had the CEOs of
10:58both Exxon and Chevron in the last two
10:59months talk about lithium they've never
11:02spoken about lithium before
11:04you have uh the ongoing discussions
11:07about dle and when dle uh beats its
11:12promise so I think as we go forward
11:16you'll see a combination of big battery
11:20and uh big Auto
11:22continue to try to secure
11:27their supply going into the next decade
11:32and you've said in the past that you
11:35also expect energy companies to get
11:37involved you mentioned that Exxon and
11:39Chevron have mentioned lithium in
11:42previous conference calls
11:45yeah they have and I'm actually advising
11:48a large Energy company right now and I
11:50haven't I have in the past and this time
11:52I think the difference between the past
11:54and I'm not naming those names but when
11:57I was in Argentina a couple weeks ago I
11:59talked to five oil companies down there
12:01and they're all interested and you have
12:04seen uh oil down there the South
12:07American Oil buy and sell resources now
12:10I think they're more of a mindset to to
12:13buy and develop
12:16Joe in April of this year Chile's
12:18president Gabriel borick put forth the
12:20national lithium strategy proposing a
12:23that the state Take Over Control of its
12:26lithium resources current contracts with
12:28stand as is but future contracts would
12:31be based on a public private partnership
12:34with State Control what are your
12:36thoughts on this and how do you think
12:38this policy or program would will impact
12:42not only Supply but the price of lithium
12:44going forward
12:45well I actually made the cover of the
12:48online version of La Segunda the paper
12:51and Chile criticizing uh the borage move
12:56saying I believed it would effectively
12:58slow down development outside the
13:01Atacama I do I will walk back one thing
13:05you said he did say that the two
13:08contracts in the Atacama could go as is
13:10but he also stated that he wanted to see
13:13both parties negotiate and sqm really
13:17doesn't have a choice they have to
13:19negotiate with kadelco they're the
13:21appointed uh nominee because their
13:24concession runs out in 2030. and even
13:28though it's 2023 that may seem like a
13:30long time but if you're deploying
13:31Capital large amounts of capital
13:35it's that's a pretty near-term thing if
13:38you're not going to uh have those assets
13:41after 2030. so I think you will see a
13:43deal between sqm and the government that
13:48gives the government what they want but
13:51also gives sqm
13:53long-term uh secure resource and
13:57Albemarle is in a much better position
13:59from the perspective of their deal goes
14:01to 2043 and they can they can wait a
14:03couple of years and see if borage is out
14:05and this all changes
14:08but we'll have to see how both parties
14:10play it on the other resources there
14:13there is a resource out there that is
14:16not part of the the new deal because
14:19it's under an old confession that can go
14:21forward but all the other undeveloped
14:24solars out there
14:25if the government wants a 51 percent
14:28carried interest they haven't been clear
14:30about whether they intend to uh put up
14:33the capital for their 51 but if they're
14:36not going through that basically puts
14:37the country in my opinion in Chinese
14:39hands the Chinese will make those kind
14:42of Investments Western companies will
14:44not
14:45Joe you are constantly on the road
14:47presenting at conferences and speaking
14:49to investors and earlier this year you
14:52were in Argentina for the lithium South
14:53America conference and I'm just curious
14:56what are your what are you hearing from
14:58investors and also other companies at
15:01that conference
15:03well I think there's now
15:05a gold rush mentality and I saw it both
15:09at the fast markets event in Las Vegas
15:11in June and what I sought in salt
15:13Argentina
15:15it's it's a combination of fomo and then
15:21some realism that there may have been
15:23missed opportunities
15:25early in the decade uh when the
15:29movement of the energy transition wasn't
15:31so obvious I mean that's been one of the
15:33big problems with investing in lithium
15:36because a lithium boom was always
15:38predicated on
15:40EVS taking off
15:42and we had a lot of
15:45false starts going back to Carlos gone
15:48saying he was going to have a million
15:49five of the leaf on the road in the
15:53middle of the last decade and Barack
15:55Obama saying in his
15:572011 State of the Union Address he was
16:00going to have
16:01over a million plug-in vehicles on the
16:03road by 2015 or 16. those things just
16:06didn't happen which made the lithium
16:08industry very cynical about investing
16:10now everybody believes it
16:13it's before us you have all the auto
16:16companies making declarations about when
16:18they're going to stop making ice
16:21now that it's real
16:22you've got
16:24the time lag it takes a long time to
16:27bring a lithium project on so playing
16:30catch-up is going to be interesting and
16:32there'll be a lot of money there'll be a
16:34lot of value destroyed
16:36as people get the gold rush mentality
16:40and in terms of the attendees or the
16:43number of attendees are you seeing more
16:45people attend these conferences than you
16:47have in the past
16:48yeah I think it's
16:51I'll use the salt example the first time
16:54I spoke in salt at lithium South America
16:56and it alternates each year between the
16:58provinces but the first time I spoke was
17:002018
17:01insulta and they got 600 people and they
17:04were just Overjoyed because they had
17:05never had anywhere near that number
17:07and that number stayed relatively flat I
17:10think the last few years and then this
17:11year they got 1700 which was CR and they
17:15had they had a waiting list they they
17:17didn't have room to do more than 1700 if
17:21they had been able to let everybody in
17:22it would probably been closer to 2000.
17:26so in spite of this pullback that we've
17:28seen in 2023 there's still a great deal
17:30of interest in the sector
17:32oh I think I
17:34I think we're just at the beginning of
17:37the interest
17:38you have to go back and look at 2020 and
17:41it towards the end of the year when the
17:42price just started to go back up
17:46EV penetration globally was less than
17:48three percent at the time price started
17:50to go so once you go three to five you
17:52had this big Tipping Point
17:55the supply chain wasn't able to handle
17:57it price went crazy
18:00and now you're looking at a world that's
18:03not going to be totally dominated by
18:05China in the future
18:07so once you bring the EU and North
18:10America into the battery and EV game it
18:14puts real pressure on China because
18:16China used to get
18:17um virtually everything that was
18:19produced in Western Australia would go
18:21to China that's no longer the case the
18:24Aussies are trying to convert their
18:25spasmine into chemicals themselves plus
18:28there's there they'll be ready buyers in
18:31North America
18:33and Europe as conversion capacity gets
18:36developed in those jurisdictions so even
18:38though China's plans are to grow rapidly
18:42and to maintain its dominance they are
18:45freaking out and going everywhere trying
18:48to secure resources
18:50so in your opinion in spite of this
18:52pullback that we've seen in the sector
18:54it's a massive buying opportunity
18:57yeah I think you have to be selective
19:01and do your analysis but yeah this
19:05lithium thing is going to run and that's
19:07what if if you look at and I've got a
19:11chart in my presentation that shows some
19:13of the biggest banks I I think I put
19:16five of them on there plus or four plus
19:18my uh forecast
19:21all of the investment Banks but one that
19:25I put on that chart predict a shortage
19:28throughout the rest of the decade but
19:31they all have price going down below 20.
19:34and that makes literally makes no sense
19:38especially some of those uh same
19:40companies when they predict the spots
19:42mean price they predict the sponge
19:43Marine price dropping but staying in a
19:46level
19:47where the converters the cost curve
19:49would be higher than the price so I
19:52think it's just a
19:54people still aren't comfortable with
19:57lithium as a business they're still not
19:59com they want to put it in the lens of
20:01uranium or the lens of iron ore or the
20:03lens of something else and say it's just
20:05like this because they don't understand
20:08it if you look at the industry it's
20:10still controlled by a very small number
20:12of players you may have 500 companies
20:14out there with lithium in their names
20:15but you don't have a dozen that make a
20:17difference
20:18Joe you run a very successful podcast
20:21focused on lithium can you just tell us
20:24the name of the podcast and where can we
20:26go find more information on it
20:29the global lithium podcast is on all the
20:32major platforms
20:34whether you listen on Apple or Spotify
20:36or even now Amazon's got it and uh
20:41honestly between Apple and Spotify 75 of
20:46my listeners use those too but there's a
20:48smattering of you know whether it's
20:50Google or whomever
20:52Joe before we wrap up I'm going to put
20:54you on the spot now the Buffalo Bills
20:56had such an amazing season this past
20:59year but they lost to the Bengals in the
21:01divisional round is this going to be the
21:03year for the Buffalo Bills
21:06barring
21:08injuries to about five different play
21:11five different players and people can
21:13probably figure out who those are one
21:14would be Josh Allen they stay healthy
21:16all year I like the bills chances to uh
21:19get to the get to the last game but I'll
21:22be in Western New York at the time
21:25and uh we will suffer with the faithful
21:28if that if the bills don't do it all
21:32this year
21:33well Joe that was a very insightful
21:36conversation on lithium and also the
21:38bills and I want to thank you for making
21:39time today
21:40always a pleasure Amy
21:43go Bells go bills

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