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Why are lithium prices collapsing?

internationalbanker.com

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Re: Why are lithium prices collapsing?

#51

Post by newswasboring »

CogitoCogito wrote: post #45
newswasboring wrote: post #41

Earlier quoted context omitted.

Supply demand doesn't, but this rampant gambling is morally detrimental as it has unnecessary negative externality in society. They don't want to accept that their jobs are just a leech on society and has no other benefit than to fill their own pockets.

I certainly agree there are many morally degenerate speculators whose presence is an overall net negative, but I think speculating on a commodity’s price is pretty much required to make any sort of long term plans involving that commodity. It all depends on the specific circumstance really.

I work in manufacturing, in the high end of the tech. Our products have perhaps the most complex supply chain. I have talked to the industry best about this. I have never once heard an expert cite speculation as helpful for there 5 year or 20 year plan. But I don't want to make an argument from personal incredulity, can you cite a source on how speculation helps long term planning? Not pop sci stuff, something concrete like a trade article a manufacturing trade or something written by a supply chain engineer?

Re: Why are lithium prices collapsing?

#52

Post by newswasboring »

RandomLensman wrote: post #50
newswasboring wrote: post #43

Earlier quoted context omitted.

There is more to economics than supply and demand. This unnecessary gambling has too many negative externality and IMO no positive effects other than making some people some money with no work.

How do you measure the amount of unnecessary vs necessary gambling?

Necessary gambling is what helps the market figure out the real long term availability of something. I have not seen any necessary gambling in my years in manufacturing. So in my view all speculation on commodities seem unnecessary.

Re: Why are lithium prices collapsing?

#53

Post by rmm »

I work in hard rock mining.

Lithium is opaque market. It’s opening up.

Contracts get fixed. Supply costs shoot up. Miners open more mines. Prices collapse. Bigger miners eat smaller miners. Rinse and repeat

Re: Why are lithium prices collapsing?

#54

Post by CogitoCogito »

newswasboring wrote: post #51
CogitoCogito wrote: post #45

Earlier quoted context omitted.

I certainly agree there are many morally degenerate speculators whose presence is an overall net negative, but I think speculating on a commodity’s price is pretty much required to make any sort of long term plans involving that commodity. It all depends on the specific circumstance really.

I work in manufacturing, in the high end of the tech. Our products have perhaps the most complex supply chain. I have talked to the industry best about this. I have never once heard an expert cite speculation as helpful for there 5 year or 20 year plan. But I don't want to make an argument from personal incredulity, can you cite a source on how speculation helps long term planning? Not pop sci stuff, something concre…

> can you cite a source on how speculation helps long term planning

Unless you lock in all commodity costs, how is long term planning even possible without speculation? If you plan to open a distribution center somewhere, the optimal location depends on e.g. fuel costs. You can’t do anything but speculate about the costs of those commodities. So I don’t even see the need to track down sources. Do you not see that you just need to guess at the (future) cost of certain things?

Re: Why are lithium prices collapsing?

#55

Post by jpgvm »

yunohn wrote: post #29
bawolff wrote: post #14

Earlier quoted context omitted.

Speculation & gambaling is just second order supply & demand.

If you have massive buy/sell orders between finance bro speculators - how does that equate to real supply/demand for the underlying commodity?

There is a finite supply of the underlying, each sold future equates to agreed upon future deliveries. So in reality the number of contracts sold (not traded) does equate 1:1 with demand for the underlying.

When that doesn't hold true you will end up with Failure To Deliver (FTD) which causes Very Bad Things™.

Generally speaking though commodities markets aren't rigged in the way that people complain about in some other markets but they are subject to pretty violent volatility in the face of uncertainty.

This is largely due to pretty fixed supply with highly variable demand. i.e I can't just shut off all the oil wells right now and return ships currently on-route to energy exchanges and even if I could I wouldn't have the storage. Storage is also an interesting one because storage costs money and was pretty much why oil contracts went negative for a short period.

Re: Why are lithium prices collapsing?

#56

Post by RandomLensman »

newswasboring wrote: post #52
RandomLensman wrote: post #50

Earlier quoted context omitted.

How do you measure the amount of unnecessary vs necessary gambling?

Necessary gambling is what helps the market figure out the real long term availability of something. I have not seen any necessary gambling in my years in manufacturing. So in my view all speculation on commodities seem unnecessary.

Opening a new mine is nothing but speculation, for example, and price signals from markets play a role in such decisions.

More narrowly, the ability to forward sell or buy things allows financing of production but in turn it needs people willing to take the other side. Derivatives money is a thing.

Re: Why are lithium prices collapsing?

#58

Post by rocket_surgeron »

newswasboring wrote: post #23
bawolff wrote: post #14

Earlier quoted context omitted.

Speculation & gambaling is just second order supply & demand.

No it's not. Finance bros like to tell themselves that, so that they can justify their place in morality.

Bros treat it like a law of nature.

"nah brah it's just rational actors rationally acting with rationality"

Supply and demand is a thing the same way the convention of shaking hands upon meeting is a thing.

Re: Why are lithium prices collapsing?

#59

Post by jpgvm »

KingOfCoders wrote: post #17
jimbob45 wrote: post #13

Earlier quoted context omitted.

OPEC has gambled several times in the last decade on future oil prices (and not always won).

In which way has OPEC gambled on future oil prices that moved prices? To my limited understanding this would involve buying oil futures.

You don't need to use derivatives to gamble, they control the supply but that control is a lagging control. Any decision they make is essentially a bet about where the oil market is going to move in several months. They are usually big enough that any move they make is going to set the tone but that isn't always the case.

They need to make continual bets on the health of transports, changes in energy mix etc in order to move or keep the price in a favorable band for them. Misstep and the price of oil falls, cutting into their profits or push it too high and face demand destruction and shale extraction coming online because it's profitable at those higher prices, increasing competition and stifling volumes simultaneously.

Re: Why are lithium prices collapsing?

#60

Post by jpgvm »

lmpdev wrote: post #47

Does anyone have any insight into when we're going to see some movements in lithium battery prices per cell? I've seen them stuck at $1-3/cell for what feels like two years

Probably not until significantly more capacity is added. Right now all the big battery suppliers (CATL, CALB, EVE, LG Chem, Panasonic) are all at capacity meaning they have no incentive to lower prices.

If new capacity comes online and it's not greeted by increased demand (unlikely) then prices could fall. Wouldn't hold my breath though, the targets China has for EVs is going to provide strong support for demand even if the rest of the world goes into recession.

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