Lithium14 Jun 2025 20:30
Copied from X
Haven't posted in a little while, so some more of my thoughts whilst i sip my morning coffee.
You'll notice that as soon as China get the majority control over a particular commodity, the price flat lines.
Cobalt, Nickel and Lithium are three perfect examples (price charts below).
I saw a post on X this morning that said that the oversupply in lithium has come from production in the west rather than China. Whilst this is true geographically, its very important to look at this by country ownership, which is what the other chart below portrays.
So whilst the majority of lithium mining comes from Australia, its important to look at the ownership of these assets. Greenbushes for example is essentially totally controlled by the Chinese, despite only having 26% ownership.
I do think that lithium is different to both nickel and cobalt and should be compared to iron ore.
Lithium demand is growing at ~25% a year and nickel and cobalt sit at ~3/4%. The market size for cobalt is around 220kt and for nickel its around ~3Mt. The size of the lithium market is expected to hit ~4.3Mt LCE by 2030, soon to surpass nickel.
As I've mentioned before in several posts, i see many similarities to iron ore. Lithium is going through what iron ore went through from 2003-2014. The iron ore demand essentially grew from ~1200Mt in 2003 to ~2700Mt in 2014, fueled by China’s massive growth.
During this period, China desperately tried to gain control over the iron ore price and reduce it’s dependence on Australia. Looking at just how healthy the margins have been for the likes of BHP, RIO, FMG, it’s safe to say that this mission wasn’t achieved.
1. Attempt to process internal low grade iron ore.
China poured billions into their own low grade iron ore (lepidolite analogy anyone?) in order to help gain control over the price of iron ore. It worked for a while, however, they underestimated the scale at which these mines operate and the growth at which they were consuming.
It effectively failed and China remained dependent on paying fair prices for overseas iron ore. Even though Chinese domestic growth was expanding rapidly, it still couldn’t match the rate at which steel production was taking place. This infrastructure growth happened exponentially. Every analyst predicted it would be linearly, just as they are doing now with lithium consumption. Its exponential.
2. Stakes in companies
A well known case is in 2008, Chinalcos failed investment in RIO which was prevented by the Australian government at the time. They wanted to gain control over the iron ore price. If this deal had have gone through, the iron ore price would have been decimated.
Tianqi’s involvement with Greenbushes. Why is Tianqi struggling to make Kwinana work? Shouldn’t feeding US$330 per tonne of SC6 into it print cash? What are we missing here. I mean they are successfully running several other downsteaming plants throughout China.
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