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Why Has Benchmark Flipped 2027 Lithium From Surplus to Deficit? — Transcript

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0:00In China, in particular, we saw average
0:02pack size go from about 45 kilowatt
0:04hours last year to 51 in the first half
0:07of this year. I mentioned 4% unit sales.
0:10In terms of battery demand is up nearly
0:1218%. We're now forecasting around 1.1
0:15terawatt hours for the year for cell
0:18production.
0:19>> 2027 is now looking like it's going to
0:21be in a moderate deficit position,
0:2350-odd thousand tons in deficit.
0:28>> [music]
0:31>> Welcome back to the Rockstock Channel.
0:33It's Thursday, 3rd of September, and
0:36we're excited to have Iola Hughes and
0:38Cameron Perks of Benchmark Mineral
0:39Intelligence back on the program.
0:42Regular viewers of the channel will
0:43remember that the last time we had
0:45Cameron on, Benchmark had just published
0:47a relatively bearish note on 2027
0:49lithium. Today, however, that balance
0:52has flipped from surplus to deficit,
0:54driven by updated best forecasts. So,
0:57today we're going to dig into what's
0:59changed and why. Iola is going to walk
1:02us through her updated best outlook, and
1:04then Cameron will talk about what that
1:06means for the lithium balance, as well
1:08as discussing the supply risks he's
1:09still watching, and where he sees prices
1:12going from here.
1:13Before we get into it, a quick thanks to
1:15our sponsor, Clean Elements, an investor
1:18group focused on providing growth
1:20capital for critical minerals developers
1:22focused on the energy transition.
1:24Clean Elements has invested over $30
1:26million to date and is currently the
1:28largest shareholder of both Kalium
1:30Lithium and Neo Lithium Brines, two
1:32companies developing high-grade lithium
1:34brine projects in Argentina.
1:36And a standard disclaimer, RK Equity is
1:39an advisor to and may hold equity
1:41interests in some of the companies
1:43discussed today, but we are not
1:44financial advisors. This video is for
1:47informational purposes only and should
1:49not be considered investment advice.
1:51Please do your own research and check
1:53the full disclaimer at the end of the
1:55video.
1:56And with that, Iola, Cameron, welcome
1:58back to Rock Stock Channel.
2:01>> Thanks for having us.
2:01>> thanks for having us.
2:04>> Okay, great. Um let us drop straight
2:07into the questions then.
2:10Um Iola, you recently raised your uh
2:13best sell supply outlook and gave some
2:16more details about the best supply
2:17chain. Uh we'll get on to the supply
2:19chain in a minute, um but can you tell
2:21us so walk us through the reasons why
2:23you raised your cell supply outlook?
2:26>> Yeah, for sure. So, I mean, maybe just
2:29to set some some context for how we look
2:31at things at Benchmark as well.
2:34Um so, historically, when we've
2:35considered energy storage demand, a lot
2:38of that's been based on end use, so
2:40installation. You know, we have a a
2:42database that tracks every project
2:44globally that's due to come online. Um
2:46and that's been a really good metric for
2:48lithium demands in the energy storage
2:50market, if we assume some sort of time
2:53lag.
2:54Historically, a 1-year time lag has been
2:57kind of roughly assumed by the market as
2:59acceptable. And if we actually look at
3:02historical cell supply and installation
3:05data, that that 1-year time lag has held
3:07up quite well.
3:09In 2025, that started to fall apart.
3:12Um last year, we had cell shipments
3:15around 600 gigawatt hours, and the kind
3:18of consensus forecast for this year for
3:20demand are closer to 350 gigawatt hours.
3:24So, there was already quite a big gap
3:26emerging.
3:28So, what what we did, and I think what a
3:29lot of our peers have also done, is we
3:32moved our lithium and general raw
3:34material forecasts over to looking at
3:37both cathode supply, cell supply, and
3:40using those as metrics, rather than end
3:42use.
3:44And then, what that means is that, you
3:46know, when we update our cell supply
3:47numbers,
3:48very incremental shifts in output can of
3:51course push the the lithium market into
3:54a deficit or surplus quite easily.
3:57And what we've seen on the cell supply
3:59side so far this year has quite frankly
4:02been uh a lot larger than expectations.
4:05So, in the first half of the year, um we
4:08saw cell shipments close to double. Um
4:11so, we're now looking at over 500
4:13gigawatt hours in the first half of the
4:14year.
4:15Um a whole range of players behind that.
4:18CATL close to 100% growth. Um saw strong
4:22growth from Hithium, Eve Energy, BYD.
4:25Really the Chinese players kind of
4:27driving that through.
4:29And what that means is given we've seen
4:31such strong growth in the first half of
4:32the year, we have increased our
4:33expectations for the full year. So, in
4:36January, uh we were expecting cell
4:39shipments of around uh
4:41about 850 gigawatt hours, which was
4:43already, you know, 50% year-on-year
4:46increase and
4:47a lot larger than what we're expecting
4:48on the demand side. We're now
4:50forecasting around 1.1 terawatt hours um
4:54for the year for cell production. So,
4:57looking at basically um
4:59just under 100% year-on-year growth
5:02rate. So, a bit of a a shift there based
5:04on what's been happening so far this
5:06year.
5:07>> And and that's what a 20 to 25% increase
5:09on your previous forecast.
5:12>> Yeah. Yeah, exactly. That was
5:13everything.
5:13>> Okay.
5:14Okay.
5:15Great. Um
5:17moving on to China, you you mentioned in
5:19the report that the uh
5:22Chinese best demand installations, that
5:25is, is actually down year-on-year for
5:27the year to date. Um but the strong
5:30demand in the rest of the world has
5:31offset that.
5:33Why do you think we're seeing slightly
5:35weaker Chinese installation growth this
5:37year? Is it Is it taking a breather
5:39after what's, let's face it, been a few
5:41very strong years, or is there something
5:43more structural going on in the the
5:45market?
5:46>> Yeah, it's it's an interesting one and
5:48it it becomes very difficult when we put
5:50these two narratives together of, you
5:52know, incredible growth on the cell
5:54shipment side and weakness on the demand
5:56side and and does raise various
5:58questions that we're we've been looking
6:00quite closely at.
6:01Um
6:02in the first half of the year, China
6:04on the grid side down about 7% in terms
6:07of installations.
6:09Um
6:10overall the global market is up closer
6:1240%. So, been a big offset there. Quite
6:15interestingly in terms of market share,
6:18last year China accounted for 36 60% of
6:22total installations.
6:23Um and first half of this year just 36%
6:26of installations. So, a big shift in
6:28kind of the positioning of China on the
6:30global scale.
6:32Ultimately comes down to some policy
6:34changes there.
6:35Um
6:36historically the Chinese market has been
6:38very much driven by storage pairing
6:40mandates alongside renewables.
6:42Uh document number 136 last year
6:45essentially removed that. We saw a big
6:48rush, developers trying to get projects
6:50in uh kind of middle of last year before
6:52that expired.
6:54Um so, there's been a few kind of
6:56dynamics on the policy side.
6:58There's also been some factors around
7:00pricing as well. So,
7:01given some of the the high lithium
7:03prices we've been seeing, there has been
7:05a bit of hesitation. We've seen some
7:07projects delayed, projects canceled,
7:09conversations around low IRRs as well
7:12from some of these projects. So, various
7:14factors that have been holding things
7:16back. Um
7:17and we have seen, you know, over 50
7:19gigawatt hours of canceled projects in
7:21the first half of the year. And
7:24our forecast for the full year for
7:25China, I'd say it's still
7:27pretty ambitious given how weak things
7:29are so far.
7:31Um so, it's one one to watch there where
7:33there is quite a big downside risk
7:35currently to demand expectations in
7:38China.
7:39>> Uh and I noticed one of the the things
7:41that really stood out for me sort of
7:42round about mid-year was that the bid
7:44price for new ESS projects actually
7:47ticked up a little bit. Is that a
7:49reaction to the sort of low IRLs for for
7:52projects?
7:54>> Yeah, I'd say so. It's partly that,
7:56partly some of the the prices increasing
7:58as well. So, we have seen cell and
8:00system prices
8:02um ticking up across the board. Um
8:05after the document 136 last year, they
8:08also introduced document 1114, which is
8:11really kind of focused on
8:13um
8:14creating new incentives for grid
8:16standalone storage, um
8:18putting a bit more kind of
8:20market-leading policy rather than
8:22incentive-leading policy in place.
8:24Um so, there's a there's a lot of
8:26changes going on. VAT rebate is another
8:29uh quite a key one for a lot of those
8:31battery players as well. So,
8:33lots of factors at play that is kind of
8:35uh holding the market back, I would say.
8:38>> Okay. And and there's a very different
8:40sort of economics in the Chinese market
8:43compared to the economics in in Western
8:45ESS markets, isn't it? That that there
8:47are less
8:49sort of um revenue generation
8:51applications open to to best operators.
8:55>> Historically, yes, like certainly.
8:59Increasingly, China is moving towards a
9:01market which is is going to be more open
9:03to to revenues, um but it's taking time
9:06to to get there.
9:08Um I think as we move into 2027,
9:11um some of the capacity payment
9:12mechanisms which are have started to be
9:15put into place should become a bit more
9:17solid and mature. Um and developers, I
9:20think, will have a bit more kind of
9:21confidence in in how the market is going
9:23to operate. But yeah, certainly in the
9:24past, it was very much a kind of
9:27mandated approach rather than an
9:29economically driven approach.
9:32>> Mhm. Okay.
9:33Um
9:34now, just coming back to your note, um
9:36really interesting. I think it's one of
9:38the first notes that I've seen that sort
9:40of talks about where the inventory is
9:42sitting sort of in the system both
9:46in the system and geographically.
9:48Um, starting off sort of geographically,
9:51first of all, where where would you say
9:53that that most of the inventory is sort
9:56of piled up?
9:58>> Yes, it's it's an interesting one.
10:00There's
10:01a few different places you can then
10:03think about inventory being sat.
10:05So, the first one would be,
10:07whether it's still as a cell or whether
10:09it sits as a system.
10:11So, for context, first half of this
10:14year, we had cell shipments about 500
10:16gigawatt hours, system shipments were
10:19around 300. So, you have 200 gigawatt
10:21hours which is currently sat as a cell
10:24somewhere in that supply chain.
10:26Some of that will be in China. So, we do
10:28have a large number of system
10:29manufacturers, non-integrated system
10:31manufacturers, who operate in the
10:33Chinese market, key players like Hyper
10:35Strong, CRC, who will all have a stock
10:39pile of cells in-house. You then also
10:41have any sort of overseas system
10:43manufacturer, for example, Tesla, who
10:46will be procuring cells from Chinese
10:48players. So, that would be another
10:51source of it. So, you have
10:53that inventory which is really just tied
10:55to where systems are manufactured, and
10:58right now that's really China, Southeast
11:01Asia a little bit,
11:02Europe a much smaller degree, and then
11:04the US.
11:06Then you have the next bit of inventory
11:07which sits within the actual systems
11:09themselves.
11:10Um,
11:11some of that will be in transit, and
11:13then some of it will be at project
11:14sites. And that can be quite diverse,
11:17but is ultimately going to be where we
11:19have our strongest forecasts and
11:21strongest demand expectations for
11:24second half of this year and 2027.
11:26Um, Europe a big one. We're expecting,
11:29uh, markets to essentially double this
11:30year. Australia, Chile,
11:33um all have very strong pipelines and
11:35we've seen quite a lot being delivered
11:37to these these countries. I think the US
11:40is maybe the
11:41the standout one where if we if we look
11:45at the import data for batteries from
11:47from China or even globally into the US,
11:51they're one of the only countries down
11:53year-to-date because of some of the the
11:54various policy changes they've had
11:56there. Um
11:58some batteries were probably put in last
12:00year to get ahead of tariffs and to
12:03stockpile for various um compliance
12:05measures. So, there will be some
12:07inventory from cells from last year sat
12:10in the US as well. So, lots of different
12:12places where they could be sat, um but
12:14it's it's quite diverse.
12:16>> And and what about the Middle East?
12:17Because obviously that's been a a major
12:19region of growth over the last couple of
12:21years. I'm I'm assuming sort of not so
12:23much this year.
12:25>> And they actually surprisingly we had a
12:28a really large project come online in
12:30the first half of this year. So, um the
12:32Middle East has actually continued to to
12:34be a strong demand market, um both on
12:37the utility scale side of things, but we
12:40are seeing as well a pronounced interest
12:42in in the behind-the-meter applications.
12:44So, you know, any market where and we
12:47saw in the past with Ukraine, we've seen
12:49it in Pakistan with solar in the past,
12:51where there is conflict uh and a a great
12:54need for energy security, we often see
12:56individuals turning to resources that
12:59will kind of
13:00bring that security. So, um residential
13:03batteries is a a growing market for sure
13:05across the Middle East.
13:07>> Okay. Okay, great. And and and just to
13:09sort of finish up on BESS, um we
13:12obviously talked about the inventory in
13:13the system. What what's your estimate of
13:16what that actual inventory is in terms
13:18of days of demand? Um and and and where
13:21do you think that sort of sits in terms
13:23of where it should be for the industry?
13:26>> Yeah, it's uh
13:28it's I'd say it's very hard to put a
13:29number on it and um we probably don't
13:31have a
13:32a great yeah, number of days to think
13:34about. Um but maybe maybe to that point
13:37one of the
13:38interesting things to think about and
13:41and keep a close eye on it particularly
13:42is, you know, we mentioned some of the
13:45the weakness in the Chinese market year
13:47to date.
13:48Um
13:49if we take those cells apply thick
13:51numbers that
13:53are coming through now and are expected
13:54for the next few years, unless the
13:57demand side kind of catches up with
14:00these supply expectations,
14:02um there is, you know, risk of that
14:04constructional oversupply becoming an
14:06issue. We could be looking at a similar
14:08path pattern to 2022 EV cell oversupply
14:12market. So,
14:13something to to keep an eye on. Um
14:16cell supply is booming, but the demand
14:18side is
14:19is not quite booming at the same rate.
14:21It is booming, but not at the same rate.
14:23>> Yeah, okay. And I and I guess the risk
14:26to that then is that, you know, um
14:28demand for ESS slows down and then you
14:31get that sort of impact of that
14:33inventory in the system and it just sort
14:34of uh
14:36moves through the supply chain
14:38um
14:39all the way to raw materials. Yeah.
14:40>> Yeah, and you know, from the from the
14:42cell manufacturer's perspective,
14:44um
14:45you know, right now they're all vying
14:47for that market share. Um they want to
14:49be in that top 10 and uh do what they
14:52can to to
14:53to grow their business there. So,
14:56they'll go use whatever mechanism they
14:58can, whether it's reducing prices or
15:01um
15:01yeah, trying to get the best bids
15:03possible. So,
15:04that's something the Chinese government
15:06is conscious of and they're definitely
15:08trying to
15:09crack down on some of that oversupply
15:10potential.
15:12Um
15:12so, yeah, one to one to watch for sure.
15:15>> Okay, great.
15:17Um let's talk briefly about EVs cuz it's
15:19also been an interesting year for EVs as
15:22well.
15:23Um Chinese EV sales growth has been
15:25pretty negative in the first half of the
15:27year. Signs that starting to improve a
15:30little bit now, but still negative
15:32year-to-date.
15:33What do you sort of see for the rest of
15:35the year?
15:36>> Yeah, so first half of the year China
15:39were down 14% year-to-date
15:42um versus a global uh figure which is up
15:454%. So rest of the world is I mean
15:49ex-China ex-US I say I'd say is um
15:52really kind of supporting that that
15:54global figure. 4% on the unit sales
15:56side. Battery demand is is a quite a bit
15:58bigger than that actually.
16:00Um in China for the full year we're now
16:03expecting -5%.
16:06So um yeah, looking at decline this year
16:09um but we have seen that kind of
16:11continued improvement over the last few
16:13months and we do expect the kind of end
16:15months of the year to continue to to
16:18improve.
16:19Um
16:21I'd say I guess to counter that what we
16:23have seen a more positive sign in China
16:26is if we look at the actual production
16:28figures within China they do continue to
16:30be quite strong
16:31um and that's really because of exports
16:35um
16:35since yeah, basically consecutive record
16:38months since March this year
16:40um and we saw yeah, half a million
16:42vehicles exported in July. So some
16:45really impressive figures there.
16:47>> And and we have seen that sort of
16:48pattern before for China haven't we
16:50where we have you know, really strong
16:52growth for a couple of years under
16:55um
16:55um
16:57government support and then
17:00um
17:00it it sort of drops away for a year and
17:02resets.
17:04>> Yeah, and and you know, the the
17:06interesting thing in China this year as
17:07well was this it's not just the EV
17:10market which is in decline and and
17:11that's that that's the I guess the
17:14challenge that we've now shifted to in
17:16the Chinese market is you're at a level
17:17of maturity where
17:19if the total vehicle market is is down
17:21is going to have quite a big impact on
17:23EV expectations. So, the penetration
17:26rate is increased year-to-date,
17:28but the total vehicle market weakness,
17:31general consumer sentiment around
17:33purchasing has been quite poor.
17:35So, that's that's holding things back a
17:37bit.
17:38>> Okay. And if we shift to to ex-China,
17:41obviously Europe's been possibly a
17:43little bit stronger than we're
17:44expecting, but it's really sort of rest
17:46of the world ex- ex-China, ex-US,
17:49ex-Europe that's going gangbusters.
17:52What are you What are you seeing? What
17:54are the key markets for EVs outside
17:57those regions? And And what are your
17:59forecasts for ex-China sales sort of
18:02going forward the next couple of years?
18:04>> Yeah, so been a been a strong start of
18:07the year.
18:08Europe in particular, they've they've
18:09provided the majority of the additional
18:11sales volume.
18:13But then we've had growth rates of near
18:16above 100% across Southern Central
18:19America. So, Brazil has been a big one
18:21there.
18:22South Korea had a very strong start of
18:24the year.
18:25Oceania, Australia, New Zealand both
18:27been very strong penetration rates in
18:29those two countries essentially doubling
18:32in the first half of the year.
18:34Combination of both the war and then
18:36also
18:38some of the subsidies in place there,
18:39too.
18:40And then Southeast Asia has also been
18:42been really strong.
18:45So, I actually I can look out my window
18:48where I'm living and I can see on the
18:50ports all of the the EVs lined up ready
18:53to be sold in in Singapore. So, there's
18:56Yeah. Pretty impressive to see.
18:58>> So, So, you're seeing those BYD super
19:00super transporters
19:01>> Yeah. Yeah. Yeah. It's quite crazy to
19:04see.
19:05>> I I remember in
19:06in the early noughties I had a contact
19:08who used to live in Shanghai and we had
19:10the the ferry boat index. He used to
19:13count all the ferry boats on the river
19:14and and that's how we assessed how
19:16strong China was at any time. So you
19:18could [snorts] start up the car
19:20transporter series.
19:22>> Yeah. Yeah. Yeah. Start counting all the
19:23railway ships.
19:25>> Yeah.
19:25>> Um
19:25>> Okay.
19:26>> So yeah, for the full year,
19:28um I think in terms of
19:30share, similar to what I shared on the
19:32the storage side is quite interesting.
19:34So last year, China was 63% of global
19:37sales. And for this year, we're
19:39expecting it to be 55% of global sales.
19:42So quite a a big dynamic shift going on
19:45there.
19:46>> Okay, great. And and one of the things
19:49um that we actually talked about the
19:51last time we had you on the show was was
19:53battery sizes and the mix of EV sales.
19:57Um and we disagreed on that and you were
19:59right,
20:00uh which I'm going to make a point
20:02about. Um so battery sizes, average
20:05battery size have actually jumped this
20:07year and it's due to a higher proportion
20:09of BEVs compared to PHEVs.
20:12Um so do you think that trend will
20:14continue going forward?
20:16That's obviously a bit of a reversal of
20:18what we've seen recently.
20:19>> Yeah, it's interesting one. In um in
20:22China in particular, we saw average pack
20:25size go from about 45 kWh last year.
20:28That's BEV plug-in hybrid combined,
20:31uh to 51 in the first half of this year.
20:34So you had a combination of more BEV
20:37sales.
20:38Um you also had some changes to the the
20:40subsidy program, which previously were
20:43kind of favoring some of the smaller
20:44vehicles, but now uh we're seeing more
20:46premium vehicles being sold. Um we
20:50actually revised our pack size
20:52methodology in our most recent uh EV
20:54forecast. And one of the revisions that
20:57we did make was a bit more kind of
20:59front-loading growth on pack sizes. So
21:02we we do expect pack sizes to continue
21:04to grow quite aggressively in the in the
21:06near term um before flattening out a bit
21:09earlier than previously um we we were
21:12anticipating. So, yeah, a lot of
21:14technology innovation going into large
21:16pack sizes and we're seeing that coming
21:17through across the boards. Um
21:21just on that battery demand number as
21:22well, you know, I mentioned 4% unit
21:24sales in terms of battery demand is up
21:27nearly 18%. So, it's a a really stark
21:30difference there.
21:31>> Okay. And and I just
21:33you know, obviously one of the the
21:35factors that sort of differentiated the
21:37Chinese market over the last few years
21:39is the average battery size is is much
21:41smaller because
21:42the the vehi- vehicles on average are
21:45sort of much smaller.
21:46Um do do you think that sort of you
21:49know, differentiation will continue? I
21:51mean, you you talked about average
21:52battery size about sort of 50-odd
21:54kilowatt hours. I think the average
21:56battery size in the US market is like
21:5870-72 kilowatt hours. So, do you think
22:00China will continue to have a smaller
22:02battery size on average?
22:05>> I think I think we'll continue to be
22:06lower for sure and we actually do have
22:09um the pack size dipping down a bit
22:11again in the second half of this year
22:13because
22:15essentially, you know, there is almost a
22:16bit kind of force increase this this
22:19first half of the year because of the
22:20subsidy scheme and we do expect some of
22:23the smaller vehicles to become, you
22:25know, start to sell well again in the
22:27second half of the year.
22:28Um
22:30so, yeah, generally lower pack size will
22:33be consistent. There is strong demand
22:35for small vehicles both in internal
22:37combustion engine
22:38uh and for for EVs and we don't think
22:41that's going to go away, but some of
22:43these pack sizes within those vehicle
22:44classes uh do continue to increase and
22:47that's the something that even the the
22:48Chinese government has been increasingly
22:51kind of mandating um
22:53plug-in hybrids but for in particular,
22:55they introduced some minimum ranges,
22:57some minimum pack sizes and that can all
22:59start to have an incremental impact on
23:02the overall average pack size.
23:04>> Okay, that's great. And you sort of put
23:06some numbers around there in terms of
23:09your uh lithium-ion cell output for
23:11cars. Can I just ask you what do you
23:14think is a fair sort of 5-year CAGR for
23:18for lithium-ion cell output growth?
23:22>> Um
23:23so
23:24maybe
23:26I don't have it in front of me. Maybe
23:27ask me that again. I'll open it and come
23:29back to you.
23:29>> Okay, I'll come back to you at the end.
23:32>> Yeah, [laughter] yeah, sounds good.
23:33>> Great. Well, thanks very much. That that
23:35has been really interesting. Now, I'm
23:36going to move on to Cameron and and talk
23:38about the sort of um
23:40uh the impacts on the lithium market. Um
23:44and yes, I will come back to you at the
23:45end on that. So, um Cameron, um
23:48in your comment that you that I've seen
23:50on sort of social media, you were at
23:52pains to point out that your sort of
23:54improved view on lithium really comes
23:56down to the higher demand forecasts, not
23:59so much to changes to your sort of
24:01supply forecasts. Um but what what does
24:04that actually mean for your lithium
24:07balance for this year and next year?
24:11>> What does the supply side mean to our
24:12lithium balance?
24:13>> No, what does what does the higher
24:14demand forecast mean for your lithium
24:16balance? Yeah.
24:17>> Looking looking at 2027, because 2026 we
24:21were already
24:23of course saying that the market is in
24:25deficit position. Um looking at the
24:28price. And if we're looking forward to
24:292027,
24:31um we were in a a surplus position from
24:35memory.
24:36Um maybe it was
24:3920 odd thousand tons um
24:41in in surplus. Um
24:44and then growing. And of course, you
24:47would never have a market that continues
24:49to grow in surplus for multiple, you
24:52know, 5-plus years without some kind of
24:54correction again happening.
24:56Um
24:57and so we were always pointing that out,
24:59but now we're saying, well, 2027 is now
25:03looking like it's going to be in a
25:04moderate deficit position. Um
25:0850 to odd thousand tons um
25:11in deficit. Yeah, that's 7% or no
25:14around 2% of the market. So, it's it's
25:16quite delicate, I would say.
25:18Um but because of that
25:21uh
25:22shift from deficit from surplus to
25:25deficit, uh we're seeing prices having
25:28to increase. Just looking at the
25:30mythology we have, of course, if if the
25:32market's in a deficit,
25:33prices are going to go up or at least
25:35stabilize.
25:37Um [snorts]
25:38And so, it's quite a simple um outcome,
25:41really. Uh
25:43you know, it doesn't mean that we see
25:44now deficits also forever, either. Um I
25:48still think it makes sense that the
25:49supply response is there from deficits
25:51and from higher prices. Um
25:55it's it now we're saying 2028 rather
25:57than 2027.
25:59Um it I it's just an
26:01>> issue of timing, really, how long it
26:02takes the industry to bring that new
26:04supply on. Um
26:05>> Yeah, and
26:07Yeah. Yeah. Yeah.
26:08>> In your in your piece, you you have
26:11talked about the supply risks. Um and uh
26:16obviously, you've given an update on the
26:18CATL Chinese project, but apart from
26:22that, what what are the major sort of
26:23supply risks you see both to the upside
26:26and maybe to the downside as well?
26:29>> Yeah, there were there's primarily, I
26:31would say, down risks to the downside in
26:34a sense that there's more supply that
26:35could be disrupted in 2027. And
26:39uh
26:40this would include Ganzi Wo.
26:43Um
26:44But it would also include, say, Mali,
26:46Nigeria. Um
26:48due to um
26:50insurgency in that region that hasn't
26:52gone away. Um, logistics bottlenecks at
26:55the port. Uh, Zimbabwe as well, which is
26:58the probably Zimbabwe is the number one
27:01uh, risk factor now.
27:03We
27:04have factored in both G and Z war and
27:07uh, Zimbabwe into our 2027 number.
27:10Um, but if
27:12that does get either completely shut off
27:15in the case of Zimbabwe, then that would
27:18um, yeah, the look we're already saying
27:20the market's in a deficit,
27:22uh, but it would really exacerbate it.
27:25Um, prices would react of course, but
27:28um, that could be a temporary. It could
27:29be like a Q1 um,
27:32uh,
27:33it it a Q1 disruption or it could be an
27:36entire year. Um, you know, we we have
27:38seen all these Chinese companies now
27:40coming through and saying they're going
27:42to build a lithium sulfate plant. Some
27:44of them have started building. That
27:46might be enough for the government to be
27:48able to at least save face and say,
27:50"Hey, look with we have
27:52um,
27:53gotten out of companies to start
27:55building downstream now."
27:56So, that that's that's what we're
27:58saying. So, and then on the other side
28:01for supply upside or
28:03uh, what could be added in addition,
28:05we're quite conservative on Manono.
28:08Uh,
28:09we we're only around a third of what
28:12Zijin is actually saying that it can do.
28:15So, um,
28:16yeah, we try to be balanced.
28:19And I think there is upside potential
28:21there though. Um,
28:23looking at the
28:24the the the um, infrastructure that
28:27Zijin has built in DRC.
28:29Hundreds of kilometers of roads and but
28:31at the same time they've only done
28:33some small test shipments. So, um,
28:37we're not too um, bullish or you know,
28:40optimistic on on kind of scale that they
28:42could achieve in the shorter term. But
28:45certainly in the longer term
28:47that does exist. And And again, like I
28:49would just highlight, too, that
28:51actually, I made a mistake when I said
28:53before around 20,000 surplus. I think
28:54actually it was closer to a 100,000 ton
28:56surplus um in 2027 that we previously
28:59had.
29:00But it it it again, it it highlights
29:03just how delicate the market is. So,
29:05this both a shift in demand from cell
29:07supply, but also
29:09Zijin and Manono
29:11could wipe out that surplus um in 2027
29:15that like we previously
29:17uh predicted if
29:18or Jiansi Woe coming offline could have
29:20wiped out that surplus. And similarly,
29:22this time, Zijin's Manono could wipe out
29:26that deficit. But we're just saying
29:28that's probably unlikely in 2027. Um
29:31it's a 2 million
29:33and a bit market um quite
29:36relatively small still, I would say.
29:39>> Okay. And And coming back to Jiansi Woe,
29:41because obviously the Chinese market is
29:43uh very um occupied by it. And every
29:47time there's a rumor, you know, the
29:48G-fex is up 3% or off 3% or or whatever.
29:52Um you've said recently that um there's
29:55a problem with the EIA, and it's back to
29:57sort of care and maintenance. Um
30:00I just wanted to ask you, obviously when
30:02it first came on, the lithium market was
30:05considerably smaller than it is now. Um
30:08do you think it would be as impactful on
30:11the lithium market as as it was, you
30:14know, 2 or 3 years ago?
30:16>> Yeah, it's a good question. No,
30:18obviously not.
30:20As we get out to 2030 or even 2027,
30:232028, no, the market grows, demand
30:27will go from just 2 million tons to 2.3
30:30million tons within 1 year, and then
30:32it's 2.5, it goes to 3 million quite
30:35soon after. It's
30:37And then that 100,000 ton
30:40uh yeah, supply from GMZ WO,
30:42uh is
30:44And again, fairly low very low grade and
30:47arguably potentially lower quality
30:50cells. It plays a part in the market,
30:53but uh
30:55yeah, not a huge
30:57it's going to be a it decreasing in its
31:00importance going forward. For sure.
31:01>> Okay. And and can I just ask, in your
31:03model, do you split the lithium industry
31:06into segments? For instance, do you see
31:09more of a shortage in raw materials than
31:11in lithium chemicals or or vice versa?
31:13>> Yeah, we do. And uh
31:16we've been doing that for over a year
31:19now. Um
31:21Of course, spodumene
31:23has its own sub market to some extent.
31:26It follows the wider market, of course,
31:28but uh the converters in China um as
31:32part of China's general overcapacity in
31:35most things,
31:36uh vying for feedstock, but also wanting
31:40the most reliable feedstock source, uh
31:43and in the most stable jurisdictions,
31:45the highest quality, and still
31:47preferably, even though their processing
31:50technology is improving, uh low
31:53detrimental elements, of course. Um DMS
31:57potentially. I know they can easily
31:59handle the flotation
32:01um side of thing the the output from
32:03from those plants,
32:04uh but there's still preferences, and
32:07and this does play out um in the market.
32:09So, you have Of course, we do see a
32:10deficit in in uh
32:13in the feedstock side, but we were
32:15saying that in 2025,
32:172026, it then it's tricky to say, well,
32:20will that be plugged by the brine side
32:22of things? Um
32:24I don't think so. You know, for now, we
32:26are reliant on as well feedstock hard
32:29rock responsiveness to to higher prices
32:32for now, too, because brine takes a
32:33while to get up and running. DLE takes
32:35many
32:36potentially a decade of R&D. Um And so,
32:40I think the converters
32:42um will continue to
32:46uh be somewhat somewhat of price takers.
32:48And And we do forecast, and we had
32:51in the past, and still do forecast now.
32:55Um Although, if we look far enough back,
32:57this was not the case. But
32:59uh until recently, last year or two,
33:02um certainly we've seen spodumene prices
33:04now forecast commanding over chemical
33:07prices in terms of a ratio.
33:10>> Okay. Okay.
33:11And a number of analysts that I I track
33:13are suggesting that we could see 100
33:15150,000 tons a year of new supply coming
33:18out of China next year then in LCE
33:20terms.
33:21Um some of that, obviously, is the CATL
33:24mine that we just discussed, but a lot
33:26of it's coming from brine, from
33:28recycling.
33:29Um do do you agree with that view, or
33:32uh are you less excited about Chinese
33:35domestic production?
33:37>> Uh domestic production from a mine from
33:40a mining point of view, I think we're
33:43conservative. If you look at the the
33:45ruggedness of the landscape in Sichuan,
33:48and and the remoteness, and the you
33:50know, the conf- or the the the issues
33:52surrounding say Xinjiang, and then you
33:53have Jiangxi, where um you now have some
33:57environmental
33:59uh regulations seeming to be enforced,
34:01and some large mines
34:04um
34:05reaching their quota early, um looking
34:07at shutting down some mines.
34:09Uh it's not an optimistic outlook for
34:12growth in in these spots. Uh and then in
34:15Qinghai, where our analyst was just
34:17there
34:18uh doing site visits,
34:20um
34:21they've really improved their recovery
34:23rates. Uh we wrote up this this note.
34:26So, if any listeners want that note, uh
34:27we can I can I can forward it. Um
34:29recovery rates are great, um improved,
34:33uh,
34:33massively, but the brine input rates are
34:36still very
34:37uh, uh, limited. That's the bottleneck.
34:39And so,
34:40uh,
34:41yeah, we still have growth from China,
34:422026 to 2027, just under 100,000 tons
34:46LCA, um,
34:48uh, that make contribution to our supply
34:50demand forecast, so
34:51that's after waitings and so on. Um, but
34:55that includes Jadar, as you say, so uh,
34:58and then, you know, looking out into the
35:00longer term, it does flatten off.
35:03Uh, we need to see growth from other
35:04places, I would say.
35:06>> Okay. And and outside China, which
35:09countries do you see the bulk of new
35:11supply coming from in the next 2 to 3
35:12years or so?
35:14>> Yeah, in the shorter term, again, it's
35:16hard rock responsiveness is there, um,
35:19able to build those mines a
35:21bit quicker. And so, places where that
35:23they they those exist,
35:25um,
35:27but also where the skills exist and the
35:29knowledge and the people exist,
35:31obviously Australia, um, expansions,
35:34greenfield greenfield projects,
35:36um, do come into the mix in the
35:39medium term, uh, couple of advanced
35:41greenfield projects, big names,
35:43but mostly expansions. Um,
35:47when you're
35:48looking at it, it's equaling growth
35:50almost to
35:52I would say, uh, look, Africa is not as
35:54as as high growth as Australia is in our
35:57forecast, but in general, Zimbabwe is
35:59going to be flat. Um, Nigeria is still
36:02growing, but again, it's
36:04uh, reaching its
36:07potential high. Uh,
36:10all the surficial pegmatites have been
36:13mapped out, and a lot of the Chinese are
36:15now going to other countries. We've seen
36:17Sierra Leone pop up, like we
36:19discussed last podcast. Um, uh, South
36:22Africa is on the target list, right?
36:23Namibia. They're They're really huge in
36:26our forecast, but there's potential
36:28there.
36:29Um,
36:29North America also has its some really
36:32great projects, but also they they have
36:35to they they're more in the medium to
36:37longer term because of the regulations
36:39there, the cost of of building these.
36:42Um,
36:43so I can't point out any one particular
36:45boom country that's going to plug this
36:46gap. Um,
36:48in in say,
36:50well,
36:51you know, plug the gap next year in
36:53terms of
36:54uh when we look at cell supply it is
36:55such a massive growth in terms of
36:57demand.
36:58Um,
36:59it is somewhat of an equal contribution
37:02in the medium term.
37:03>> Okay.
37:04Um, I'll put you on the spot
37:06unashamedly. I used to be an analyst, so
37:08it's always nice to put analyst on the
37:09spot.
37:10Um, do you think that lithium prices
37:12increase from here in the near term and
37:14and um and what sort of
37:17ballparkish lithium price are you
37:19looking for for next year?
37:21>> Yeah, that's okay. Well, you can put me
37:22on the spot.
37:24We do We do forecast a high prices
37:27uh for next year. Yeah, according to the
37:31methodology which is essentially that if
37:33we're seeing a deficit we
37:35um
37:36yeah, prices should be higher. Um,
37:39so in terms of a ballpark and I mean
37:41before I answer that too, uh
37:43previously we we did see
37:46lower prices in 2027 because the numbers
37:49suggested an oversupply due to supply
37:52response. We're still seeing that supply
37:54response, but this time we're seeing
37:55stronger demand now in our outlook.
37:58Um,
37:59even though prices were declining next
38:01year, it wasn't a crash next year.
38:03Um,
38:04if they continue to decline then
38:06potentially um much lower prices, but
38:09uh we're talking theoreticals. Next year
38:12around the $22 mark um on average is our
38:16is our price forecast for our annual um
38:19forecast.
38:20Um,
38:21yeah, which I find it probably fires a
38:23sort of middle of the road. And then uh
38:27spodumene holds up very strongly as well
38:30in terms of the ratio.
38:32>> Okay. Uh and maybe we'll come back to
38:35Iola's um homework in terms of the the
38:37CAGR of cell supply.
38:42>> Yeah, sure. So, I just had a check at
38:44our numbers uh for EV cell supply. The
38:46CAGR 2020-2030
38:4914%. Uh and on the best side 21%. So,
38:54overall talking about 15% growth.
38:56>> Okay. Okay.
38:58Interesting that I think that's a little
38:59bit lower than than uh some sort of uh
39:03commentators are suggesting, but but you
39:05have historically been conservative.
39:08>> 2030 we're talking 4.6 terawatt hours to
39:12give you a
39:13a ballpark.
39:15>> Okay. Uh and then just one final
39:18question maybe for both of you. Um
39:21what do you think is the puke point for
39:23the cell industry in terms of lithium
39:26prices? How high do you think lithium
39:28prices will go or could go before we
39:31start to see substitution into other
39:33chemistries and demand destruction?
39:36>> Well, I can take a first stab at it. I'm
39:38actually our average price being 22 uh
39:41doesn't doesn't really give you the
39:43insight into say the
39:45maybe a higher price scenario or um say
39:48Q4 seasonal
39:50and the
39:52potential high price which we have
39:54around $24 a kilogram. It might not
39:57sound like a lot. We have a very
39:59comparatively high spot price.
40:02It is limited. I think it should be
40:04limited um in the upside for to maintain
40:08a healthy lithium industry. I don't
40:10think that we forecast the price and
40:13therefore the price becomes what we
40:15forecast. I wouldn't like to give myself
40:17that kind of
40:19you know, reputation. I That's just not
40:21how it works. So, I'm not saying that if
40:23we did forecast $80 a kilogram, it's
40:25going to go there.
40:26But, what I'm saying is like
40:28look in
40:30if we're to see a
40:33sustainable
40:34yet high price enough to sustainably
40:37induce supply
40:39$24 or $22 a kilogram is actually a
40:42long-term incentive price.
40:44Um is reasonable to me because during
40:46the last high price cycle was over 20
40:49$22, $24 a kilogram that we start to see
40:53a lot more sodium ion announcements.
40:55It's just um
40:57what we anecdotally I suppose is what
41:00what I what I've seen.
41:02Um but, I I guess I could let I will
41:04comment a little bit more on the
41:06sodium ion maybe comparative economics
41:09to lithium ion.
41:11>> Yeah. But, it's is an interesting one.
41:14Um
41:14I think
41:15you know, we we've we've been looking at
41:16this quite closely around the potential
41:19for sodium ion and we've had a lot of
41:21internal discussions around whether we
41:22should be increasing our sodium ion
41:24outlook based on all of the supply
41:26announcements that have been made.
41:28And in the near term, we haven't made
41:31any upward revision. Longer term, we
41:33have made a slight upward revision just
41:35because of some of the the advancements
41:36that are taking place.
41:38What we're starting to see is that cost
41:40parity can hypothetically kind of be met
41:43with sodium ion
41:44um for certain applications, certain use
41:47cases.
41:48But, there are still a number of
41:49barriers that hold things back.
41:51The reality of it though is if we have a
41:53sustained lithium price for any longer
41:56amount of time, the investment into the
41:58sodium ion supply chain will only get
42:00larger. And that's ultimately going to
42:02make it more capacitive. So, you're kind
42:04of on this knife edge where lithium
42:07price goes up, sodium ion investment
42:09increases, and then therefore you'll see
42:12your demands kind of take a a step off.
42:15It's similar with the storage market. If
42:17we start to see project IRRs declining
42:19because of a high lithium price,
42:22people will either stop basically stop
42:24building the projects, or they'll look
42:26for an alternative technology. So,
42:28it's definitely a bit of a balance that
42:30you have to negotiate with
42:32um because alternatives do exist, and
42:34they're only going to get better as
42:36well.
42:37>> So, so it's incumbent on lithium
42:39producers and lithium developers to keep
42:42the supply rolling, not to to try and
42:46hold off, you know, investing in new
42:48supply because if they do that and and
42:50prices spike, then we're going to get
42:52demand destruction.
42:54>> Yeah.
42:55It's not the It's not the diamond
42:57industry, unfortunately.
42:58>> Yeah. Okay. Uh well, on that cheery
43:01conclusion, let's uh let's finish up. Uh
43:04Iola Hughes, Cameron Perks from
43:05Benchmark Mineral Intelligence, thanks
43:07very much indeed for your time, and uh
43:09look forward to talking to you in
43:10another
43:11uh couple of months to see how the
43:12industry's developing.
43:15Thanks very much.
43:15>> for having us.
43:19>> [music]
43:32[music]

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