Volatility in China isolated

1) Domestic Chinese producers ramp

up production of lower quality lithium
carbonate from brine lakes in delayed
response to meet the surging demand
creating a boom and bust scenario in
the Chinese market.

Source: Benchmark Mineral Intelligence

Separation between China
and ROW lithium prices
2) Outside of China, much of lithium sales are conducted generally as a bilateral
agreement between a supplier and a buyer. The longer-term nature of a contract and the
pricing functions built into contracts preclude fluctuations experienced similar to China
levels, ROW lithium prices are therefore higher. The divergence in lithium prices attracted
Chinese producers to export output to try to profit from higher overseas prices. Custom
data showed that in 2018, export volume increased six times to 11,131 tonnes. Over the
same period imports were down 20%, highlighting the country’s increasing self sufficiency
in the lithium carbonate market.

Incremental volume increase, oversupply scenario

exaggerated
3) Strong market demand has incentivized investment into both mining and processing
capacity with a series of announced expansion plans and new projects in the pipeline –
Bald Hill, Greenbushes in Australia; Uyuni in Bolivia as some examples. Current price
pressures curtail funding access for new projects. In parallel, technical challenges reported
in the press by some incumbent producers, variable feedstock quality and water supply
issues, illustrated the operational difficulties in bringing on new supply. Thus, in the near
term, supply will not come online as quickly as some predicted with incremental new
volumes a more probable scenario.