Lithium’s True Inflection Point (YJ Lee)

People tend to project in straight lines when real growth is exponential. What we've seen in the best market I see forecasts of in 2036100800 GW hours. Well, guess what, we'll probably reach there in two years, not five years. You've. Been on on many sort of site visits seeing seeing parts of the world. Well, the only the only travelling I did recently was to Las Vegas for the Fast Markets conference. How was that? Oh, it was pretty awesome my first time in Vegas.

But to be honest I didn't. I didn't really like the experience. I think it's a different Vegas from what it used to be. I hear complaints that it's all rent seeking behaviour there right now and it's really, really true. Everything costs so much and they try to charge you for everything. Really. Yeah, OK. Yeah, and and the hotel, every single hotel, they charge a resort fee of something like 45 or 55 USD a night extra on top of what the hotel already charges.

God, it must be private equity owned or something. I know who doesn't do that. You should and you should come with us to the Africa down under conference here in in Perth. He's the 3rd to the 5th of September like pay to put on a a banger. There's look, to be honest, there's probably more gold opportunities, but but Africa a great, a great, a great producer of of lithium where we're going

to be there and. You run a transition fund as well YJ and there's plenty of transition critical minerals in great continent of Africa. I'll tell you what, we could probably fix you up with a, you know, with a discounted ticket just for you IJ if you if you agree a couple of months. And then, and then you're going to drop me in Congo and forget all about me, you know? A great lithium projects in Congo mate. Let's not forget about that.

See mate, YJ is coming to Adu Africa down under 3rd to 5th of September. Get your tickets, they're in the show notes. You and I are going to be there. We are, mate. Very excited for this conference. Big thanks to Peter for putting this on mate. I think this is going to be the year that Africa Down Under is. It's it's best year. It's best year ever after growing massively. Couldn't said it better myself mate, get your tickets. Join us and YJ so he doesn't get dropped in the Congo.

Thank you so much, YJ for for for joining us on short notice.

We're trying desperately to understand or wrap our heads around this anti involution policy, which has, has, has come out of, of China. It's, it's made a big impact on the lithium markets already. It's, it's, this is a like a kind of a big thing that we're trying to wrap our, our heads

around. And we thought we'd, we'd, we'd speak to you all about what's going on here from, from, you know, the, the policy front in China, how that's affecting, you know, the, the mines and the critical minerals supply and, and why lithium is maybe maybe quite exposed to, you know, this emerging thematic and policy shift in, in China. And for the listeners who don't know, this is our YJ Lee who runs the Arcane, who's a fund manager for Arcane Capital.

And your fund performance is going through the roof, mate. You would, you would get a date up like 56%. So phenomenal, phenomenal results. So congratulations on your tremendous performance so far. We're glad to have your insights to to to help us learn about this. Yeah, hello. Hi, guys. Yeah, great to be back on your show. It's been what 9-10 months I think since our last episode and boy, so much has changed in the

lithium market. I think in the previous episode we were talking about well, the bottom probably arriving and I think we are a little bit early on that. But right now I believe we are past that. I think the bottom was in June this year and when when spongy min was about $600 a tonne and carbonate was 8000 and now you know prices are about 50% higher than that so. Sponge means above 1000 bucks a tonne, like in, in the space of, of two months. It's it's truly remarkable.

You were? Yeah. I it's, it's amazing, Yeah. Well, yeah, I mean at that point in time, it didn't look realistic to me, which was we had a we had a price where 2/3 even up to 2/3 of the producers in the world don't make money. And that is to me not sustainable. You know, for an industry that's growing easily 2530 plus percent per year doesn't make sense that more than half the suppliers don't make money. So I think that probably marked the bottom.

And now like you rightly point out, with the policies in China coming out a bit more in support of rational market driven dynamics, that probably signals the bottom of the market. How do you think about this, this anti involution? It's like the the buzzword of the month at the moment. YJ is it? Is it something sort of dominating your thinking and and the conversations you're having as well? No, I, I wouldn't say it's

dominating, but this anti involution thing, let's let's take a step back and understand how this whole thing comes about South China. I mean, it's, it's a, it's a huge market and it is super, super competitive. It is not the case that, you know, like the portrait in the West is all centrally planned. It's all government controlled. Not at all. What happens actually is that there's a central government layer, yes, which sets the

country policies. And then there are individual provinces which kind of act like your states in the US, right, who have their own concerns, their own financing, their own employment numbers to look out for, their own taxes to cover. And therefore their, their incentives might be different from that of the national government. So national government sets the broad country policies.

The local governments have to manage their local employment, local economies, and then down to the private sector, which then has many companies that are fighting out in the market, also fighting out at the same time against some of the state owned enterprises. So it's, it's, it's an open marketplace. So I was, I was kind of describing the, the story of competition in China right now. That was the backdrop. And what usually happens is that the government sees a clear direction forward.

For example, 1020 years ago government says batteries, we are going to be #1 in the world in lithium and batteries. And that's and that and they set the long term vision for that. Before that it was shipbuilding, before that it was steel, you

know. So what happens is that the government has set this long term vision, then the states, the provinces execute this in each of their provinces to the best of their ability and and incentivize companies to start up. Usually they incentivize this via tax policies and other other, the usual economy incentives. Yeah, some subsidies, some tax policies, etcetera. And that allows many, many companies to start up and then start competing with each other.

And you know, China is a huge place, so many provinces. And when and when this happens, what usually happens is that at the start of any major policy, maybe 50 to 100 companies get started up competing in this space. And then by virtue of their competition, the strong survive, the weak die out. Typical Darwinian marketplace.

Yeah, So and this is and by by doing this, they gain the skills, they gain the expertise, they gain the market shares and the winners eventually become the strong companies of the future, right. But the process of doing this creates huge competition between the companies in each province and between the companies at the national level. That's why we are seeing today over 50 EV companies in China. The numbers have dwindled over the last few years, Yes.

But then this is competition to the extent that they're all trying to survive. And by driving prices down, that has caused what we we have a joke. You know, everything that Chinese do that Chinese produce, they turn it into the price of cabbage. We call it bite. Yeah, right. So it goes from steel to ships to now EVs, right? They're so, so cheap. You can have an EV and wooling

for what, $5000, right. So but this process of bringing prices down, competing all the way leads to loss making situations boom and bust cycles over over decades. And now we are at the bottom of one of these cycles, which is for lithium and which means that nobody makes money, but some players are going to survive and come out the stronger for it. And that's that's how it is in the typical Chinese way of doing things. Yeah. And, and that, that process, I mean, the, the, the competition

bit kind of makes sense. But one of the realities of the, the competitive nature is that there are these, these price wars which you know, might actually in in some ways be a little bit anti competitive. The, the, the focus on this supply side policy, anti involution, as I understand it, it's actually looking to, to refrain from price wars by reducing supply across, you know, industries being steel, solar, you know, logistics, even medical devices.

That. And, and as a, as a result of that, there's a, potentially a, a mentality or a, or a cultural shift towards, you know, higher kind of profitability of the businesses as a, as opposed to the, the, the, the highly competitive overcapacity and price wars. Is that is that like a fair characterization of of your interpretation or of the policy? Yeah. But what I'm yes, they are trying to do this.

But what I think that this may not be as successful as we think it's going to be because this is pure market economics. Price wars making short term losses for long term gain is nothing new. Every economy goes through this. We've seen, we've seen price wars happen in in Western countries, in industries in the West as well. So it does not mean that this is native to China.

In fact, what happened with the solar industry like you mentioned a few years ago in the during the Green New Deal periods, the solar companies were making so much money, they are all cashed up. The big ones have billions of yuan in, in, in the bank. They can, they can wait this out. They can, they can make short term losses. They're going to lose half, half that stash, but they're going to come out with capacities double treble what they were five years ago.

So and that drives down their costs in the longer term. So I don't see this anti evolution policy immediately succeeding because it is difficult. You are fighting market pressures. What I mean to say is that it is natural for for many companies in an industry to compete on prices, drive prices even below costs for the short term so that that's to win the long term

game. And no government policy can stamp this out immediately to the extent that yes, they might be able to target specific players that run at a loss so that they can subsidise them their operations in other ways. I.e CATL, yeah, that could be successful, but industry wide, I don't think it will work for the solar industry and I don't think it will work for the lithium industry.

Why, Jim, I'm curious to just hear a couple of thoughts on, on why this has all kind of come about because there is a bit of a notion that this came about from a cultural type push. And it's the the government responding to that and that sort of dynamic through the major cities and the the cost of property rising so much and you know, salaries being so competitive and these sorts of things.

Do do you say that? Is that how you've sort of inferred this involution or anti involution policy setting coming about? It's a little bit too early to make firm judgements on this policy. I think where it's coming from, yes, to some extent they do see that this competition has gone a little bit out of hand and it's causing, it's causing kind of how, how do I say it's, it's, it's, it's a bit of a downer in terms of the national mentality.

You know, when everybody fights it out so much that nobody makes any money and everybody suffers for it, it's not a great place to be. So I think they are trying to change the culture a little bit towards more healthy to set the tone for a more healthy expectation of future market conditions. But I don't know whether that's going to work. Yeah, yeah.

And a lot of the the people we've sort of spoken with have made the comparison to the supply side reform one point O sort of call it in the 2015 sixteen period. How do you sort of compare and contrast the differences now is, is that a comparison you you kind of jump at or do you think we're in a kind of unique situation here? I mean, history rhymes, right? But never repeats itself. Back then it was mostly competition at the large SOE

level. Right now China has become very, very much a market private, most of the market power, a lot of market power has shifted over to the private companies, especially in the lithium space, should I say. And it's, I think it's harder to, you know, actually make changes the way they want, what they want to change because, you know, it's not a, it's not a SOE that you have direct control into. These are private businesses,

right? So, yeah, if you're trying to have a supply side policy that is, is targeting the private businesses, one mechanism to to to have some input there from,

you know, from, from the government level would presumably be through these this licensing mechanism. And this is this is the, the part of the news flow that has, has, has really kind of rippled through the lithium equities in

the last couple of weeks. And it's, it's it's in relation to, you know, China's government revising the Mineral Resources Law and the legislation which outlines that mine registrations and approvals are now down to the Ministry of Natural Resources. And that also means that the local governments can no longer license operations without

authorization from the ministry. We we kind of we we saw this a little bit ripple through with with notably the junk she cattle's mind, the Lipidala mind there. I think, you know, it's also goes by the name 414 as well. How did you interpret that, You know, series of events as it ties into this, you know this this policy as well? I see it in terms of economic incentive.

So when lithium prices was super high and lipidolite started coming onto the scene in 2122, then the government had no issue with these mines coming online through whichever loopholes.

You know, a Cow Lane granite mine coming online to produce lipidolite, right as maybe the byproduct in a way that they don't like being a byproduct, but it actually was the main economic product of the mine, therefore feeding into the supply chains and bringing down the lithium prices so that the battery guys and the EV guys have can survive and and dominate the industry for the future. Yes, that's in line with the national policy and therefore

it's allowed. Now prices have dropped so much that it's that other things become more important, right? Pollution, for example, lapidolite is highly, highly pollutive, toxic even to refine. And then you the amount of oil you have to booth is simply ridiculous to produce a tonne of lithium carbonate from that Jiangxi mine, the Jiangxia war mine that CATL runs, it's a very, very low grade mine. The grade is .28% and it's lipidoli.

You need to basically at such low grades, you need to move what, 350 tonnes of ore to produce a single tonne of LC. Makes no sense, right? And if you want to scale this up, some people say the, the, the capacity of this mine is 100,000 tonnes per year. I don't think it's that at the moment, but that is the, that is the longer aim. I think. Do the math. You need to move 35,000,000 tonnes of ore to produce that amount of LC before refining losses. It's. Remarkable here.

So maybe you need to produce 50. Yeah. So it's crazy. I don't think they have a 35,000,000 ton operation there. And the amount of pollution that will create will be the same. So now I think other things become more important. Cheap raw materials can be bought in the open market from Africa, from all over the world. Now that now, then the local pollution issues start coming up. This this one mine, the junction like junction was junction mine that was operating under a under

a Kalin license. Like it was the categorization was a, you know, a Kalin, A Kalin mine, but that were obviously not producing very much Kalin or any I think. So it was the wrong characterization. So the, the, the thing that they've kind of been like picked up on under this new, new policy or enforcement of policy is to get that, that licensing like to be appropriate. There's a different royalty rate between the Kalin mines and, and a little bit of like mine, as I understand as well.

So it's kind of like a, a higher cross cross, like a higher cost structure to, to, to change it. And then within that same province, there's like there's six or eight other other mines, smaller scale, which, which have to get their own, like their own licensing changed or September when they're, they're kind of they're, they're they're set to lapse.

Is that all accurate? Like, and do you see risk to them being like being being shut down as well or like, like what's your interpretation of that? To be honest, I don't think anybody knows for sure. It's too vague in a moment. Nobody really knows unless you're like super super insider. Gotcha. So these are the rumours that are swirling around in the lithium lithium WhatsApp group chat, so. Yeah. But I mean, I mean, let's look at a, let's look at a bigger picture, right?

We don't need to get into too much of the nitty gritty. It doesn't matter what the slightly different royalties for different minerals, etcetera are there. Let's look at the bigger picture. Catl's mine gets taken out for minimally 3 months, right? Maybe even six months. That takes maybe about 20-30, at least 15 to 30 kilotons of LC out of the market. If the other mines get taken out for a couple of months as well, then that's that much supply out of the market.

But the big picture is that the lithium market last year was 1.2 million tonnes. LC this year is probably going to be 1.5 to 1.6. I think 1.6. Other people more conservative than 1.5. But the bottom line is that demand is growing 25 to 33% this year every three months that the market, every three months the demand is growing at maybe 6% or 7%, right.

So think of it this way. Every three months the the world needs to bring a new TNTR wall, a new CNTR Lipido like mine to the market to meet the incremental demand growth. Is that going to happen? I suppose when you pave it like

that, you're getting in the nitty gritty of the smaller supply stuff. Is, is is like less like a less pertinent part of the equation when you think of the supply demand and, and you've you've been like constant on this point YJ for a long time that the like consensus is massively underestimating demand here. And yeah, I'm keen to just like, peel out what? Like why, Why consensus is so

wrong. Sometimes they are looking at the narrative, the, the, the story out there is that low prices means means that demand is not catching up to supply, Therefore demand must be slow. But that's what that's how the the news agencies tend to portray this picture. But the fact is that go back to economics, right? Basic economics and your demand curve price quantity. The lower the price, the larger the quantity demanded.

Translate it into real world terms, the cheaper your car, the more people switch to this cheaper model right? And now we now we see with low battery prices cars E VS getting cheaper than petrol vehicles, getting cheaper than diesel vehicles. Heavy used vehicles are are switching over very, very quickly because the ROI on these electric vehicles is so much higher.

Now. One of the things that I've been looking at very, very closely, which I think analysts or consensus hasn't really focused on is electric trucks. This is huge. This is a huge market in China. They sell about last year, the heavy electric trucks in China sold about 75,000 units. This year they are on track for 160,000 units over 100% growth year on year. Each of these heavy trucks has a battery 10 times the size of a

of a passenger car. And these trucks are going everywhere in mining, in hauling. You know, you even see China travelling autonomous trucking in China already. So I think that the demand for lithium is a lot higher now that prices are low, which is which I think is in line with economic theory. I don't understand why analysts have a car demand growing in the teens this year. Makes no sense. So demand is going to grow gangbusters, right? What does that sort of make you think?

If demand grows gangbusters, we know more supply needs to come online and the supply is going to come online naturally faster from the existing mines that are in production and can expand. And when I think of that matter, think of Lion Town.

Obviously they revise their their ability to produce to to 2.8 million tons per annum that they're currently like, like their mining rate is. But we know that that can be like 4 million tons per annum pretty quickly, which means more and more tons coming from underground, which means more ground support. Is all ground support required to enable the more mining coming from underground? And why not use the best in the business when it comes to ground

support, Sandvik ground support? Sandvik ground support, they're the only, the only name you need to know when it comes to ground support, mate, because it can come to your mind in a jiffy like that because there's distribution hubs all over the world. They've got a team that cares about it and they they provide tailored service, great feedback, great people to order from great people to, to ensure that the product is on spec and it is delivering the results

they need. Great, great, great person. And Derek, Kurt A. 100%, mate. And just like the lithium market growing gangbusters, these guys are improving year after year after year. Mate, ground support is not something that just needs to be sort of left in the corner. It gets better by the day. You know what the tagline is mate? Keeping people safe. Keeping people safe, call Sandvik ground support one of the pushbacks that a lot of people have.

And I'm really curious to hear your thoughts on why J is that a lot of this has been subsidy LED, government incentives, tax credits, these sorts of things, and maybe we've seen some of them sort of peel off. How do you kind of respond to the narrative that it's only been propped up by governments

thus far? We've seen subsidies fall off in many, many economies and doesn't affect, doesn't affect the rate of change of EV adoption goes up towards China is now at 50 over percent and subsidies have been falling off year on year.

And the, the best component, the stationary storage like the, the growth there has been, I think it's sort of safe to say it's been astounding and, and underrated as well. And I remember when we spoke a number of months ago, you were pretty, you're pretty bullish on, on this part of the market. I'd, I'd love to sort of get your reflections on how that's grown versus what you, what you had thought back then and where

you see that kind of evolving. Well, actually I kind of raised my best forecasts I think from 10 months ago. I didn't, I didn't go back to check the previous numbers, but I think they're higher now. I think by 20-30 we reach a 1.5 terawatt hour market from 200, just over 200 GW hours last year. I think this year we are slightly over 300. That's kind of in line with row motions estimate as well, I think. And why this is happening is because two things.

One, batteries have become so cheap that the payback period on most grade level best is now five to seven years. And that's great economics, right?

And in China, commercial best has now payback periods of one to two years. I'm not kidding you. I learnt this from the Fastmarkets analyst. Credit to him, Chinese guy. After his presentation at the Fastmarkets conference, I had to chat with him and he told me this. What's happening in China is that for the commercial guys, they are actually, when I say commercial best, I mean smaller scale, privately owned best

systems, right? And what they do is that they charge midday when of course prices are pretty much negative and they discharge into the evening peak, which is the usual best operation, right? But then they also charge midnight and discharge early morning peak. And that means that they use their asset twice a day, not just once, and that drives the yield of the asset and therefore the payment period becomes one to two years.

With that kind of economics, people sure as hell are putting in tons of best into the market wherever they can. I've not met a single best manufacturer that says that they are short on demand. Yeah, that's, that's fascinating. And this, this part of the market is 1 where we've seen like a huge discrepancy with the, with the people we've sort of spoken with and what their growth assumptions are versus consensus broker.

Like a sort of factor of 2X. Like some of the, the feedback we've gotten is that they think this part of the market is twice as big as what a, a heap of brokers out on, on the street have have written it up to be. Is, is that the sort of like thinking you've got as well that the, the consensus in in Wall Street or whoever you sort of think about there is way below where it's actually at? People are projecting like as opposed to observing actual installation rates.

They're they're they're they're they're projecting, you know the the wrong numbers. Yeah, of course. I mean, it's, it's the typical thing, right? People tend to project in straight lines when real growth is exponential. What we've seen in the best market I see forecasts of in 2036100800 GW hours. Well, guess what, we'll probably reach there in two years, you know, not five years. And the same forecast error

happens in solar. I mean, go back, go back to, and that's the other part of the best equation that I forgot to mention. Solar go back to the world

energy outlook for the last 10 years. All right, they are, their forecasts are always off by a factor of about 3-3 years ago they said that last year's solar installations were going to be 200 gigawatts. No, it was 600. And to the extent that they're all forecasting linearly, the real growth has been vertical. And now that drives the entire best market. So much solar is being put in the world today. A lot of markets experience negative electricity pricing

during the midday. You cannot install new solar without new, without pairing them with batteries anymore. And just in time, battery prices have come down so much that solar plus batteries now are even cheaper on a kilowatt basis, kWh basis than coal or gas. So it all makes sense now. And and if we touch on the, the

chemistry that's that's really dominating in that part of the market, LFP, is there, is there any competition in, in your mind there? No, no competition there. LFP is cheaper. It's got more charge cycles than NMC. Grade batteries don't really need the the incremental increase in energy density that NMC delivers. You don't need, you don't need a battery to be able to provide a higher faster acceleration for your for your car because grade batteries don't move.

So yeah, LFPS are are the are the chemistry of choice for best. Very while we're on the the, the chemistry pace, Raja, I'd love to get your observations on like in the lead up to, to cattles like IPO the the potential, like the potential, any observations on like cattle's discourse to

the market being talking up sodium ion and then sort of subsequent and, and, and, and maybe maybe, you know, ensuring that there was an oversupply of production in the market via their, their, their own mind, which if you, if you just take it on face value, the mind is uneconomic. However, cattle is making money on having lithium price be low when their margin is, is, is incremental there.

Do you, do you see any like, like are you part of the cohort that thinks that like maybe maybe cattle was was being a little bit disingenuous in, in their, in the way that they were talking about sodium mine and also in, in their in, in, in this in the supply and margin kind of component of that market? To be honest, not really. I mean, I don't, I don't subscribe to every single conspiracy theory. Not everyone, not.

Everyone someone named me, I mean, to the extent I think keto is did run the the mind to influence lithium prices globally. I think that's true. But the sodium ion battery side, I mean, I'll give them to be honest, if I will keto, I will probably develop sodium ion batteries as well. Because you're, you're a large battery company. You can never say, you know, five years or 10 years down the road which chemistry is going to

become dominant. You have to play every, everything and you have the resources to develop everything and see what works right. And if our view of the lithium market is right, that best electric trucks, cars, the demand grows so quickly that lithium cannot, that there's not enough lithium in 2020, even 2026 onwards to meet demand to 2030. Then something has to come in and pick up the slack. And the only something out there right now really is sodium. Yeah.

So I think that could be a use case for sodium to pick up some of the demand that cannot be met via lithium batteries for, for example, Best. Yes, a sodium battery setup will require about three times the land footprint compared to LFPS. But if you're putting Best out in the desert, yeah, I mean, you can use three times the space. It doesn't matter.

So if, if we focus on the ramifications like we sort of touched on the, the price response has been pretty, pretty quick in, in the scheme of things. But I think it's fair to say it's not in the interest of the the Chinese government to see lithium prices run away to levels they they got to sort of last time. So how do you think about that dynamic?

I know that already sort of what a bit of a bit of sort of influence in the amount of speculation that could take place with regard to to futures pricing and these sorts of things. Do you do you think there's a big role that they're sort of playing behind the scenes in where the lithium price sort of settles? Honestly, no, I don't think they are trying to guide the government on a on a national government level basis.

I don't think they're trying to guide the price of lithium per SE. It's a very, very small market. And to be honest, if you look at lithium as a percentage of costs these days, given a huge scale of manufacturing, the raw material isn't, yes, it's a significant, it's some part of the bill of materials, but it's no longer as large as as they used to be. Now manufacturing scale has kind of driven production costs down in a in a very big way.

So even even if lithium prices were to double from where they are today, go from 10/10/12 thousand to 2010, 2020, 4000 per tonne, LCEI think the battery market could absorb that. CATL and BYOD have I, I think have no real issues raising prices by a little bit to cover this cost and then everybody can and then there'll be a healthy and incentive pricing in the market to incentivize new supply to come online. Otherwise we go into a deficit much, much quicker than people

think. So, so if we sort of reflect on that point the the potential supply response, obviously through 22 into 23, we saw a magnificent supply response from an incredible run up in the price.

And this sort of supply came from pockets where people didn't think it might otherwise sort of come or it came on quicker from parts, say Africa and Zimbabwe. Another sort of it would, are there regions that you think might be able to sort of click on supply or existing mines that might expand supply that you're sort of keeping a keen eye on to to sort of see that this price level maintains? Well, we are running out of continents to be surprised from, right?

I mean, the only one is Antarctica, isn't it? Yeah, but I mean. By two weeks from the sea floor, mate. Well, that's that's nickel van. People are trying that. I don't know how well that's going to go, but. Well, that's not going there. Yeah, yeah. But yeah, it was a small market. 2022 was a very small lithium market. It was what I think if I recall correctly, an 800K ton market in total, nothing compared to iron ore, copper, etcetera, Tiny,

tiny metal market. We are still tiny, we're still small, but it's a lot. It's a lot bigger than before. This year if we are 1.6 million tonnes, that's double the size, the market size has doubled. It will not be so easy to influence the price either way from here going forward. The larger the market gets, the more supply you have to bring online to the market to crash the price. So in next year, we are probably in a 2 million tonne LCE market.

You would have, if you bring on an additional 100K tonnes like what happened from Africa three years ago, now you're now you're influencing the market by 5% instead of the 16% that they used to be. And it is not difficult, sorry, it is not easy to bring 100K tonnes of supply to the market quickly. How they did it in Africa was literally they went to all the outcrops they could see and just started digging. No mine plans, no very, very few

approvals. Just went in, started digging and go. Same thing happened in Jiangxi. We had school children. Unfortunately the economy incentives were there. Go out into, you know, pick up rocks, stuff it into rice sacks, load it into the back of the truck, send it to the refiner. That's what happened. But I don't think it is easy to influence the market in a 2 to 3,000,000 tonne market. I, I suppose, I suppose like what we're trying to figure out is so we've had some, some

supply out of the market. You pave the picture that demand is much like much higher and growing much faster than most the market is expecting. A lot of the, the people who are more, have a more moderate outlook for lithium in, in the short term. They point to, you know, inventories are still very high, but they're probably not focusing on the fact that inventory days is at a local low because the market's much bigger. Now. Is the market tight enough in

your opinion? Like have we like is the market so tight that we're going to see they're pretty pronounced move forward and upward in the price in your expectation? Like is, are we, are we at that moment right now? Is this, is this a trend that's going to continue or are we kind of just going to like moderate around, you know, 1000 bucks a tonne AC6? I I think you're exactly right that people are focusing on the wrong inventory numbers,

absolute inventory levels. Yeah, they matter, but it's the days in, in usage that really, really matters. In a market that's growing 30% a year, you need 30% more inventory every single year. So that number has to go up. And you're also right that it's, it's I think it's tightening in the sense that we've not seen rejections of shipments like we

saw in the last cycle. So in the 2020 lithium up, was it 2020 or 18 in the previous lithium boom, boom and crash during the crash shipments were being rejected right from from Australian producers. We don't see that in this market. So something is going on. We've heard that too. We've heard that too. There's been no observation of any, any cargoes, yeah, like being, being being pushed back or delayed or anything like that, like it's been seen. There must be speaking with the

same people. YJ Yeah. Yeah, yeah. So I mean to the extent that and and it's, and it's very weird. I'm even hearing stories of low grade, even lepidolite being refined together or or blended into with sport, you mean. And honestly, I have no idea how the how this technical, the technical process of this would work because it to my understanding it's kind of different processes. But yeah, I think we've got to a point where people are realising the market is probably a little

bit tighter than they think. I don't want to make any speculation on prices where they go in the short term because price forecasts I think are inevitably wrong. But we just need to step back, take a look at the big picture thing of incentive pricing and whether or not we are there yet. Right now $1000 barely covers costs for Western Australian players, Some of them. So if you want the supply to continue producing for the next three years, it has to be here

or higher. Does $1000 incentivize new for spodumene? Incentivize new supply to come online? Barely. 12,000 LC. Is it enough for a new brine to come online or new clay or DLEI? Don't think so. So we're not there yet. It's, it's simple when you just think of it in the with your outlook and if you're, if you have the same expectations on

demand growth that you have. Yeah, we, we, we're, we're pretty reflective of this moment as a, as a result of what, you know, could, could be a substantial policy shift combined with, you know, demand and market tightness all at the same time. Like what do you think? Like we, and also maybe our listeners should be, should be paying more and more attention to. The fact, the fact is that supply growth is all baked in

all right. People are producing, are developing mines from the same places where they know that that's been a a deposit for the last 1020 years. So to me, supply is no longer surprising. Demand is where people should spend all their time analysing and comparing versus forecasts. I think EV adoption is growing

even faster than people think. Yes, the US is slow and the US media dominates headlines. You know, it it articles coming out of the US that say, oh, EV sales are slowing makes no sense, right? It's growing, it's accelerating in China, it's accelerating in. Even, shall we say less developed economies, they are literally skipping the petrol age. They don't want cars. They don't want petrol cars anymore.

They are going straight for EVs. BYD is sending their 7000 car car car carrier ships everywhere around the world. That ship has gone to those ships now. Now they have a fleet. Those ships have gone to Germany, they have gone up north to my neighbor Malaysia, they have come to Singapore, Right. So EVs are being exported all around the world from China now. And I think everybody should focus their attention on demand. It's growing so much faster. Just look out for the confirming data.

That's a, that's a really interesting perspective, YJ because the, the classical capital market capital cycle investor would always sort of be taught to focus on supply because supply is in a sense easier to determine because the speed at which you can turn a mine on takes time. And then you can, it would just sort of base from there. Whereas the demand side needs you in a sense to understand human psychology and these sorts of things.

But but you sort of come at it from the perspective of there's enough confirming data. If if you look backwards, which people aren't doing to, to give you that confidence to look forward across all the sections of the market, whether it's a VS stationary storage and sort of see that this, this is a real sort of trend that's going to continue. Well, well, mate, I literally have a degree in economics. And one thing that we actually do see in economics is that

demand creates its own supply. Yeah, yeah. Lower prices like to more demand the the demand. It's not just about lower prices, right? I mean, if it's a very real thing, if human. The reflexivity of yeah, yeah, the network. Effects that come from I mean. More and more correct. Yeah, yeah, yeah. It's not that supply creates demand. I mean, if you have a supply of something, you still have to convince people to want it. And then the more they want it now, then your supply becomes

valued. If you have. Yeah, if there's something that is not demand in demand, then you're never going to get a price for it. But if there's a demand for something, it will drive, it will change the market to create supply. So demand creates its own supply.

I love that point. YJ I'd, I'd, we'd love to, to give you a bit of an overrated, underrated, quick, quick fire, quick, quick, quick, quick, quick fire segment. If you're, if you're open minded and willing to give us your, your salient views on on, you know, hopefully I've got like 10 things written down here that I'd love your overrated underrated. I think we can add a couple as well. Yeah, the the couple ideas we will. The first one's very easy because we know what your response is.

ESS overrated. Underrated. Not not loved enough, but. Yes, massively underrated is the the response. Yeah. It's not overrated, underrated, but it's one of the other. BYD or Tesla as an electric vehicle maker? Have you got a preference? BYD. Yeah, undeveloped Western Australian spodumene projects. Overrated or underrated? Wow, sorry, Broad. That's a broad, broad range, man. I know, I know, I said. Undeveloped. Undeveloped. There are not many big deposits left. Mostly overrated, sorry.

We might have asked you this one last time, but worth getting another take the the future prospects of DLE. I recently became a little bit more convinced that DLE could work, but at the same time it is not easy to transplant to other brine fields. Therefore probably still mostly overrated in in most people's minds. I don't think that much DLE supply comes online in the near term. Brazilian Spodumene. Resilience. Spodumene Brazilian. Brazilian. Brazilian.

Oh yeah, low cost supply will continue to produce for a long, long time. Underrated. Yeah. Albemarle. Broad, broad question. Nah, neither overrated nor underrated. It's it's imbalance. Hong Kong listed lithium producers. Underrated. Yeah. How about investing in Chile for for lithium production? You really want to get into that all. You have to say is overrated consolidation probability of

Chinese downstream. Low. Yeah. This one's sort of slightly adjacent, but I know you've you've covered it in the past. Overrated or underrated Silver? Ah, still underrated.

Beautiful YJ I've got, I've got none, none left, but all I've got is just appreciation for your insights and you're making the time to give give you a salient use an analysis. It's refreshing, it's compelling, it's course for us to to evaluate our own assumptions in a, in a market that's clearly growing rapidly. And yeah, congratulations on your awesome performance so far. And and we hope you will come back and and join us in the future as as the market

continues to to develop here. Oh, yeah, definitely. Thank you guys again for the opportunity to be on your show. Just happy that, yeah, now at least we have a bit of a track record to show potential investors. And I hope that you know this, this gets our, you know, our name out there a little bit more. Thank you. Absolutely great to chat again YJ, thank you. Thank you. Super Insights. Super Insights makes me reflect

a lot yeah. Big big big fan of IJ Big fan of our partners which make our production possible. Big thanks to them A. 100% Axis mineral Services, Sandy Ground support Africa down under and focus by market Tech mate. Uduru. Uduru. Now remember, I'm an idiot. JD's an idiot. If you thought. Any of this was anything other than entertainment. You're an idiot and you need to read out a disclaimer.