Lithium liquidity jumps on CME as traders seek arbitrage plays
Open interest has continuously hit record after record since April.
Patriot Battery Metals (TSX: PMET) CEO Ken Brinsden says that while China’s lithium supply side response has been successful over the past couple of years, it has come at a cost.
Brinsden, who recently moved to Quebec to lead Patriot, is a well-known figure in the lithium sector for his role in taking Pilbara Minerals (ASX: PLS) from a junior developer to a major pure-play spodumene producer.
Although lithium prices remain low, and recent market volatility has caused confusion, Brinsden sees reasons for optimism. Speaking at the Diggers & Dealers Mining Forum in Kalgoorlie, Western Australia last week, he noted that while the supply side is currently ahead, it won’t last long given the ongoing growth in demand.
Much of the lithium oversupply is due to China, according to Brinsden. He pointed out that China had virtually no competitive advantage in lithium raw materials and the assets the country had developed were “typically not that great”.
At the conference, Brinsden explained that China has been building out the right-hand side of the cost curve to enable the biggest possible supply growth in shortest amount of time.
Speaking to MINING.COM, Brinsden said China has been developing high-cost domestic lepidolite assets, as well as lepidolite, petalite and even direct shipping ore in Africa.
Research by Canaccord Genuity shows that the average grade of Zimbabwe lithium supply in 2023 was just 2.3%, compared to more than 5% for Australian supply.
“In the face of China having to pay very high prices for lithium raw materials historically, they’ve worked really hard – especially in the last three years or so – in inspiring new and novel sources of supply,” Brinsden said.
“China has doubled down on ensuring they have sufficient supply, but my personal view is that comes at a cost. These are not typically the world’s best projects and as a result, it’s higher cost production.
“In today’s market, if you have high-quality spodumene concentrates, that would typically be coming from Western Australia today, that’s still penetrating in the market.”
Brinsden believes the higher cost Chinese production will start to fall away.
“That’s the material that’s ultimately going to define the supply demand balance and ultimately, it will fall out as demand grows and therefore, you’d expect the price to respond,” he said.
Brinsden said the world’s “great” lithium projects, including Patriot’s Shaakichiuwaanaan (formerly Corvette) project in Quebec, would be important sources of supply as demand continues to rise.
Brinsden’s speaks with MINING.com’s Kristie Batten at the Diggers & Dealers Mining Forum in Kalgoorlie, Western Australia:
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