Because I see so much "conflict metals" discussion when lithium is discussed, I would like to contribute that less than 3% of global lithium production takes place on small artisanal mines, in which place human rights abuse may occur.
Over 85% of lithium is produced by just 2 international corporations with large scale mines complying with multiple international regulation requirements.
> Over 85% of lithium is produced by just 2 international corporations
If I search google for this string, your post is the only one that comes up. How did you arrive at this figure?
In the history of industry, when has it ever been a positive indication that only two players control the majority of the supply?
Do these companies directly own the mines or are there partnerships and subsidiaries involved? What countries are they operating in? How long is the supply chain from the mine to the product?
How are water rights being managed? Is there correct oversight? Are any governments trading long term environmental damage for short term profits? What happens when the mines are depleted?
Albermarle - a Aussie company does about 1/3 of the worlds lithium mining.
SQM - a company out of Chile.
China - does the rest.
Each is responsible for ~ 1/3 of the worlds lithium production. Although SQM is on the downfall due to the referendum recently. And China is on the rise as companies like BYD are trying to really take over much of the larger lithium battery market, especially with EV cars but even laptops etc.
Most of this came from my own research for investment reasons.
Given this split at face value, then the inference that 85% of lithium is in compliance with international regulations is false. It would be at most 67%, and probably more like 33% in compliance actually.
Albemarle Corporation is an American specialty chemicals manufacturing company based in Charlotte, North Carolina. It operates 3 divisions: lithium (68.4% of 2022 revenues), bromine specialties (19.3% of 2022 revenues) and catalysts (12.3% of 2022 revenues).
It holds significant part ownership of Australian located Lithium mines (and mines in Chile):
> Talison Minerals Pty Ltd was a mining company based in Australia. It was split into Talison Lithium (as of 2020 a 51:49 jv between Tianqi Lithium and Albemarle Corporation)
and:
> Tianqi Lithium Corp is a Chinese mining and manufacturing company based in Sichuan.
Ero: mining of concentrates is carried on Australian (and Chilean) soil and subject to Australian mining regulations (some of the highest in the world ATM) with the refinment of concentrates being carried in Malaysia (high standards), Australia (high standards), some in China (various standards).
The point being that mineral resource ownership and regulation is a complicated layered business and your inference is sketchy at best.
If you're interested in learning more you can either study more on your own or subscribe to a mineral intelligence database, eg:
Well my comment is regarding who is doing the mining and more importantly where it’s being sourced.
Some have more regulations than others.
Chile has been looking to socialize its mining ops. So the international interests in their sources has waned a bit.
China does it cheaper but with far less concern about safety, environmental friendliness etc.
Overall these companies account for the lions share of raw lithium materials in the world. But what specific percentage and who is buying from who are totally different topics. For example why would a company like BYD look outside of China for lithium for its batteries?
BYD is a big supplier of batteries for companies like Dell, Lenovo and others. And they make car batteries for EVs in China and SE Asia.
Google has noticeably deteriorated in recent weeks. Does anyone have insight into that? Like more or too much gpt? The first link here is an article from 2021:
I see plenty of results from Google about this string, from multiple sources and multiple types (video, news and classic links). Unclear about that deterioration.
Right, but Google doesn't show everyone the same results. The earlier poster clearly didn't get a very good search result. If google search is bad for some people or in some cases, it should be a concern for everyone because you would never know when you are getting that poor result.
It basically does show everyone the same results. There's some session-based reranking and ads are heavily personalized, but there's basically no personalization in regular search.
Having been in some niche commodities sectors myself, Google doesn't always have relevant information and the producers are more interested in their competitive advantages that they’ll let people guess their way to completely inaccurate realities even at the expense of the industry.
It wouldn't surprise me if there are no sources that you respect.
International regulations are often very lax and not well enforced in a lot of mining operations in the developing world.
We only know what people tell us or show us (unless you are fortunate to be able to boots on the ground investigation yourself). Companies and profitting parties in the lithium supply chain want us to believe that mining is ecologically sound and not abusing people. The first hand accounts and investigations of numerous investigators tell a different story in many areas of world.
If you read up on what lithium mining actually entails (in many areas it is not really mining per se)... you'll realize it is an ecological disaster. Big mining operations are big ecological disasters and small operations are small disasters. The same can be said for oil sands and other resource gathering endeavors, so I'm not trying to paint lithium mining as particularly bad. But it is not good.
The EV and battery industries are very interested in white-washing the lithium supply chain... but it is very, very dirty. I'm not an ecologist but from what I've read it appears to me that is much worse than fracking in many operations around the world.
If the Salton Sea, California, lithium mining operation really gets underway... we'll get a chance to see what "best practice" lithium recovery looks like, which will probably have much lower ecological damage per unit lithium. The Salton Sea area is already pretty messed up, anyhow.
I agree that it's deliberate, and I extend that to any sort of mining - after all it comes from the stance of misinformed "environmentalists" not being able to tell the difference because any of that type of action is bad
There are certainly people reposting comments that mix up lithium and cobalt and keep asserting that all EV batteries use cobalt and how terrible that is. They are not all environmentalists. A lot of them are just using those talking points as a way to oppose the move to EVs.
They also like to post a photo of an open pit gold mine in Australia and claim that it is a lithium mine while complaining about the massive environmental impact. they never respond when I post a link with proper attribution showing that it is not a lithium mine.
If nuclear power were profitable, no amount of vehement opposition due to environmental risk could stop it. There'd be nuclear power plants everywhere. Fortunately for your vehement opposition, considering all costs. nuclear power has always been the single most expensive way to generate electricity, has never been profitable, and never will be, even if it wasn't regulated. Investors can't be found unless a government subsidizes construction and pays for decommissioning and waste storage and security. The only reason so many nuclear power plants were even constructed in the US in the first place is that someone somewhere, or perhaps a team or committee, vastly overestimated the need for fuel for bombs. Anyway, it really sucks, but opposition and environmental concern can't really stop the destruction of ecosystems or environmental catastrophe if whatever is causing it is profitable. Nuclear is done and didn't need help killing itself, but keep that in mind if you have any other pet environmental concerns, i.e. that to win and protect the environment, one must figure out a way to obliterate the potential for profit in risking or destroying it. Otherwise, you're just shaking a tiny fist at the sky for all the good it'll do.
I don't believe this is inherently true. Theoretical designs exist that solve a lot of nuclear power's problems: this issue is that it got caught in a death spiral due to Chernobyl. That ended investment and R&D, so nuclear power plants didn't improve while other sources of energy did, so they got even less investment and R&D.
> this issue is that it got caught in a death spiral due to Chernobyl.
Nuclear (fission) power's unprofitability predates Chernobyl to the very first reactors and continuing up to this day. The Shippingport Atomic Power Station was the first commercial reactor to come online, and it was a small reactor, cost $78M to construct in 1958. Decommissioning and cleanup 30 years later cost about $100M. Considering the plant and the resulting mess were small, I really don't think it broke even, but I can't find any economic analysis that includes all the things.
A study in 2019 found that nuclear power has not been profitable anywhere in the world.[1] The study also found nuclear power has never been financially viable, that most plants have been built while heavily subsidised by governments, often motivated by military purposes, and that nuclear power is not a good approach to tackling climate change. It found, after reviewing trends in nuclear power plant construction since 1951, that the average 1,000MW nuclear power plant would incur an average economic loss of about $8B.
And R&D in fission is complete. We know pretty much all there is to know regarding it, and reducing cost simply is not viable through more investment in R&D. We've been working on this in earnest since the late 1940's, so it's no surprise we have figured everything out other than how to do it cheaply enough to achieve economic viability. There are some nuclear power applications where economic viability don't matter, such as nuclear subs and aircraft carriers, and I expect we won't stop building those, but commercial nuclear power just can't work because of the money, and nothing else is needed to say "no," and if it was economically viable, no other objections, such as environmental, would stop it.
Yes, it's never been profitable. The first photovoltaic device was built in the 1830's, and mass photovoltaic deployment only became profitable in the last decade. R&D in fission is absolutely not complete. The investment in it has been pathetic since before computer modeling existed, there's no way there aren't efficiencies to find. So much of the field references papers from the 50s and 60s, because that was the last time there was money and a non-strangling amount of regulation. Thorium reactors, theoretically much safer and cheaper, have barely even been tried.
It would take a huge capital investment to get a program like this off the ground, so it's too risky for the market. The invisible hand's rejection is not the same as impossibility.
> The first photovoltaic device was built in the 1830's, and mass photovoltaic deployment only became profitable in the last decade.
This is a bizarre comparison. The US invested about $1.5T total in developing nuclear power. Almost nothing was invested in developing PV. If only 1% of the money wasted on developing nuclear power had instead been invested in PV, nuclear power would have been dead by 1970. A recently passed bill earmarks $6B to keep nuclear plants open. Compare to recent DoE announcement to spend $82M on PV manufacturing. Even with this nearly two orders of magnitude imbalance of spending, PV is going to beat the pants off nuclear by making tons of money compared to nuclear power losing mind-boggling amounts of it.
R&D can not make nuclear energy cheaper. It is simply commercially unviable. If you can figure out a way to make it profitable, you can have all the nuclear energy you want, but a lot of smart and capable people spanning 4 generations have already tried and failed.
nuclear did need help to kill itself. I dont know about usa but in europe many political parties were funded to destroy nuclear. trading it for coal and russian gas. nuclear is the best energy we have today . nothing ever come close to it. renewables are a fad heavily backed by people that are making money out of it. You cant power a full sized country with it. it fluctuates too much. in terms of what you need to build and renew solar panels or wind turbines it has a deep environmental impact. it is actually as renewable as nuclear… look at germany relying on fossil fuels and killing the environment to fit your green agenda. living proof of a clown state backed up by corrupt politicians
Also worth pointing out that much of EVs and grid storage are shifting to cobalt-free lithium iron phosphate batteries. Many people aren't aware of that.
Wow the replies to this are nuts. All sorts of mental contortions to make lithium sound controversial when it's way down the list of controversial industries
Generally not the big ones. They are big enough to have a local branch office that can fined if caught. Small and medium sized companies are much harder to fine as they just don't operate in your country.
When the big ones do they are very careful about it, so they can claim to be in a grey area. Tire companies know there is child labor, but they are buying from the parents, and they make sure outside of harvest those kids get a great education (when the kids grow up their either leave, or work the plantation as medical or management staff and not labor). You can still say they are in the wrong, but they have made a place where you can understand the grey
Sure, international corporations violate human rights, but unless you provide proof these lithium corporations are, then we can just assume they aren't.
Largest companies digging in the dirt creating the vast bulk of the world's lithium concentrates (prior to refining in Chima | Malaysia) are in Chile and Australia and all are listed on the Canadian Toronto TSX exchange.
Minerals and Resources rules for exchange listing are pretty tight with respect filing third party independant reports that assess mineral volumes and estimates, economic feasibility, environmental impact, and human rights etc.
While it's possible that some things are covered up in these relatively modern capital projects (eg: like conditions mining copper in PNG in days of yore leaving substantial impacts today) it's unlikely due to modern communications and the known fact that everything gets out and doesn't remain hidden - more so today than back when PNG was literally and figuratively obscured by clouds.
Austrlia is keeping clean, and you can knock yourself out looking into
Not unless significant blocks of their shareholders do . . .
Giving a shit about the environment, child exploitation, etc. by larger investment funds has increased in recent decades , there's been a rise in "ethical investment".
Ergo TSX companies care more when third party reports about bad practices are filed at the exchange.
I just did, by explaining in which cases belief can be said to exist, and you have no reply. You don't seem to be following very closely nor employing any modicum of what could be considered "reading comprehension skills".
TBH you write like a bot trained on debatebro teenagers.
There's no specific claim being made here. It's just that assuming a lithium mining company (which, as an industry, has a terrible human rights record) would not commit human rights violation because it is a multinational company is a strange assumption to make.
Not only strange but also illogical. Corporations make more profit when they act illegally. From lobbied protectionism to monopoly, exploitation of natural resources to pollution, hiring of ex government officials to bribery and gift giving and favors, and of course from hiring underpaid and abused workers in countries without labor protection, to knowingly using slave labor, and more, they have billions of reasons to break laws and violate human rights. And every time they do it, they pay a small fine that is dwarfed by their profits and nobody goes to jail.
You don't even have to look overseas. PG&E has caused hundreds of billions of dollars in damage due to wildfires caused by cost cutting; they don't want to do the maintenance they're legally required to do. Entire communities are left homeless and people are killed. And the company gets a tiny fine and the executives get bonuses.
It's actually amazing to me that corporations don't do it more often. It pays to be a piece of shit company.
That's a convenient way to dismiss ruthless exploitation of 3rd world populations, nations, and the natural environment.
And if you don't consider the police violence against the indigenous populations of Bolivia following their democratic elections then what are your qualifications exactly? "Lithium mining" is not the problem, of course, but the political interventions of Lithium interests has robbed millions of people of freedom.
All large scale economic activity in developing countries like this is often accompanied with human rights and democracy violations.
This is a false choice really. It’s not lithium that’s causing this but the broken political system. I’m half Brazilian and just the other day I heard a mining dam break that led to a mass cancer in surrounding populations. This was Vale one of the largest companies in Brazil.
It doesn’t matter what’s being used, virtually everything that comes from developing countries causes gigantic crimes that are unimaginable to first world.
You’re selecting one specific product but it’s not logical to do so. They all cause this. And what’s the other option? Not buying products from developing countries?
> mines complying with multiple international regulation requirements
Really? Please cite which regs apply in North Korea.
I am an actual miner. We have State and national regulators who visit and have authority to stop work. I have neither seen nor heard of international regulators.
> with multiple international regulation requirements.
How is that meant to be re-assuring?
As far as I know Chevron hasn't yet paid the money it is due to pay to the Ecuador state for past environmental damages inflicted on the ecosystem there, I'm positive they were branding their work to their stakeholders back-home as respecting "international regulation requirements".
The more I read about prices of different commodities the more I realise the biggest movement in prices is not because of demand and supply but rather because of speculation and gambling.
And how most of the news is manipulated. For example they are equating lithium price fall with stagnating car sales. Where as car sales might be stagnating but electric car sales are taking a larger portion of total car sales ie electric car sales/lithium use is still increasing.
Of course. The net present value of a stock or asset can only be calculated based on its expected future price and earnings. Since there's no way to know this with 100% certainty, stock prices are inherently speculative. Even value investors must struggle to accurately value a company's intangible assets.
But there's a material difference between "attempting, in good faith, to determine what the demand for a commodity will be in the future, and buying based on that" and "attempting to determine what the price of a commodity on the futures market will be and buying based on that".
When people say that a commodity's price is being driven by speculation and gambling, they mean that it has shifted from the former to the latter. This means that the price is disconnected from the actual, physical use of the commodity, and is instead being driven by the inconstant passions of the commodities market itself.
>But there's a material difference between "attempting, in good faith, to determine what the demand for a commodity will be in the future, and buying based on that" and "attempting to determine what the price of a commodity on the futures market will be and buying based on that".
These are indistinguishable. Unless you want to restrict markets to being only between suppliers and consumers, there will always be middlemen attempting to predict the price, and since they need to eat, they will be attempting to profit from changes in price.
Which is fine because suppliers and consumers are many times willing to let others handle the risks of price changes (volatility), hence the market for futures.
Of course there's a difference. It's based on information asymmetry, i.e. the 'greater fool' theory. When the information asymmetry is deliberately created, that's being done in bad faith, and is the sort of thing we call fraud when done on an individual level. It often feels like a great deal of our corporate and financial machinery are designed around diffusing actions that would be criminal, or reprehensible if done person to person, in order to allow them to be done at scale without consequence.
> When the information asymmetry is deliberately created, that's being done in bad faith, and is the sort of thing we call fraud when done on an individual level.
What information asymmetry? The previous comments referred to speculators betting on price movements.
Deliberately creating fraudulent information asymmetry would be altering data in industry reports and publishing false manufacture/consumption data. Which, I assume, is illegal.
What is illegal is financial advising without a license. Which recommending a stock falls under. Altering some one else's report and claiming your rendition is the real one is forgery or something, but writing your own report and making up numbers is totally fine.
By, for example, deliberately delaying delivery while owning a significant segment of the available commodity, such as Goldman Sachs did with aluminum a decade ago. [1], while simultaneously selling derivatives based on the very commodities they were manipulating. To the best of my knowledge, there were no consequences - if anyone knows of a financial penalty or change to law or regulations, please share!
I agree that there is concern of malfeasance in that scenario, but I was under the impression the context of the discussion was solely around the purchase and sale of contracts for the commodities (i.e. betting on the future price of a commodity), not manipulation of the actual supply and demand.
When the same legal entities are in a position to do both (participate in the futures market and manipulate supply and demand) I do not see how or why you would try to make such a distinction.
It feels like you're trying to say, "this market would work fine if it weren't for those meddling bad actors" as a response to "the problem is the bad actors".
Read up on the onion futures markets; due to a (rather fascinating) historical decision, they are one of the few commodities without speculative futures. As a result, price volatility in the market is massive, with far worse swings compared to the efficient markets where speculators operate.
I challenge you to write out what scenarios you think reducing market participants will solve. Historically it has 100% so far been highly illiquid markets with huge price spreads, which is terrible for both sellers and buyers.
What you’re suggesting means a farmer selling wheat futures for delivery a year from now needs to be at the market at the same time a bread maker is looking to buy wheat a year from now. That basically doesn’t happen because the bread maker doesn’t need that level of forward looking price stability.
That is how they were in the beginning. I recommend reading about the development of markets and futures trading to see what benefits they provide, as they are a component of any developed economy around the world.
The price should be disconnected from the actual, physical use. If we have a surplus of a substance now but there is reason to believe that we'll need a lot more of it later then the sensible thing to do is to hoard most of it until it is needed and to start producing more of it. Speculators help do that by driving up the price which is a signal to both producers and consumers.
The market thought that China was going to need a lot of lithium for EVs, so the price went up which incentivized higher production and lower use. That's a good thing because it made it more likely that China would meet their demand. Now the market has better information that China is going to need less lithium than previously thought so the price drops which makes it viable for previously marginal users.
People who say that don’t understand what’s going on. Those futures eventually resolve to delivery so this is the real price that producers are selling and and consumers of commodity buy at.
All of the speculation is entirely based on how the news might impact the physical product.
Oil prices went negative precisely because storage was full and people didn’t want the obligation to take delivery of the oil when nobody was using it.
> how most of the news is manipulated. For example they are equating lithium price fall with stagnating car sales
Mass media is mostly crap at price-move stories. It’s less manipulation than false correlation. (The writers are incentivised to write, not to write a particular story.) There is a lot of thought that goes into lithium pricing. Current price moves are mostly speculation about supply, given near-term demand can be pretty precisely measured given battery production in operation and breaking ground. (Battery supply limits EV production, which itself outstrips demand, so volatility in consumer demand is tamped at the extraction layer.) Recent debate is about potential supply from brine in China.
I personally have an impression, that commodity prices are a function of shocks. Gas prices in Europe, uranium prices in mid 2000s, lithium due to sudden EV demand, etc. World then adjusts, and prices "collapse" or rather stabilize. Basically, don't buy commodities when the price is high.
That always bugs me when these things are reported. Something goes up 30% in a year due to speculation and/or supply chain shocks, and then drops by 5% and it's "prices crash!" No it's still up ~25% year on year.
You are looking at different horizons. It might be up year over year but month over month if it trends down that information is more accurate as to where the future price will grow.
It's nothing to do with morality or any justification, it's just what it is. Since there's an instrument to gauge supply and demand, that instrument can also be wanted, so there can be supply and demand of the thing that measures supply and demand.
You can also do "bad" things on first order by hoarding the items themselves.
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.
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.
> I have not seen any necessary gambling in my years in manufacturing.
You need to manufacture a widget and it must cost no more than $5. You have a few inputs to your widget, some made with steel and some with plastic. If steel and plastic prices increase, your inputs cost more than $5 and you’re making a loss on every widget you sell.
So you go to the futures market and take a bet that the input prices will increase. If you’re right, you win $, which makes your widget manufacturing profitable and you’re still in business. If prices fall you lose the bet, your profits are lower. But hey, at least you’re still in business.
A responsible, well run manufacturing business benefits from the existence of such a market because it allows them to de-risk.
What’s the person on the other side of the trade up to?
This debate reminds me of the lead up to the Onion Futures Act, where moral outrage over speculation led to a ban and subsequent lack of insurance (and higher price volatility) for onion farmers. To the point that the son of the farmer who first lobbied for the ban returned to Congress to ask for its repeal.
> "What’s the person on the other side of the trade up to?"
The same thing: hedging/insuring against price changes. The supplier (ultimately, a farmer, steel mill, gold miner, electricity generator, etc) is getting a guaranteed price for the commodity they're selling, reducing risk.
Virtually no hedging happens between natural buyers and sellers precisely because they approach the market at different times, and don’t have the in-house pricing expertise to discern good and bad bids and offers ex ante. This is why, absent financial participants, the natural participants get hosed. (And why they use financial markets versus direct purchases and sales.)
Again, these aren’t theoretical considerations, we’ve always had naïve Puritanical elements seeking to ban speculation, and in some assets and jurisdictions they have succeeded. Reducing market participation has never worked.
> So you go to the futures market and take a bet that the input prices will increase. If you’re right, you win $, which makes your widget manufacturing profitable and you’re still in business.
This isn't remotely how manufacturing works. Manufacturers are focused on making the widget, for them the most important thing is that material is available, not a paper contract.
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.
Essentially you are saying 100% of bad things are bad. Which is true, but also meaningless statement. Since it would still be true in a utopia with no bad things.
I can give you a great example of the positive aspect of speculation.
Look at the futures market. Speculators are a big part of the liquidity of the futures market.
Price of wheat is $60/bushel. Farmer won't harvest for another 6 months and is worried prices will drop. They can secure a future and lock in the price now.
Wheat purchasers aren't on the other side of that trade, because why would they lock in a higher price? A lower price benefits them.
Speculators come in and bet on the price of wheat, creating a deep pool of futures that can be bought and sold.
When speculators were allowed into the oil markets rather than actual buyers, the price jumped to like $120 barrel in like 2007. They had to stop it because hedge funds could just drive the price up indefinitely. See Bitcoin.
Speculation didn't suddenly exist in 2007. I do recall several regulations being changed at that time which _relaxed rules_ around the market. Is it possible that these regulations had more to do with the outcome than mere "speculation" in and of itself?
"speculation" was a bit improper, but prices are intertwined.. demand in one sector will affect demand in other, so forecasts cause price fluctuation that reaches afar.
commodities suppliers (miners, farmers, distributors) use futures market to hedge against their inventory everyday. Trade exchanges serve a very important function in this ecosystem.
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?
To ask for an expert quote on a thread on hackernews sounds like a little bit overkill for me, and for me (and probably parent), it does feel a little obvious.
Let me try to answer this though: one example out of many is how Kodak speculated that the transition to digital cameras would lead them to lose profit over the long run, so they chose not to pursue the route. This was a long term plan that lead them to bankruptcy. (of course, they changed course once they realized that digital cameras were competitive options, but the original long term goal was to continue the film camera route, shown by their unwillingness to even try to produce digital cameras as an possible option)
> 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?
I see you didnt reciprocate the courtesy of not making an argument from personal incredulity. These things are complex af. When the people who optimize supply chains all day every day tell me that speculation market is more of an hindrance than help, I'm not going to take your random argument to be worth anything.
The futures market is the only thing that allows you to lock in a price to buy something 12 months from now at a reasonably consistent price. How is that a hindrance?
The existence of the futures market does not prevent a copper provider from entering into an exclusive sales contract to sell 12 months from now to a specific consumer. However, unless they match the current 12 month contract price, one of them is taking a bad deal with what they can get on a much more liquid market. Additionally, their counter party risk is now much more significant because they are tied to one other party.
Maybe you could actually offer something specific about how “the speculation market is more of a hindrance than a help”?
So far whenever I see this, it’s people who don’t like that the price changes on them but their solution is to remove participants from the market to a point where it is so illiquid the lack of trading looks like the price isn’t moving.
To me it seems, you both are rather debating semantics.
Of course it is "speculating" trying to estimate fuel prices, but this is not meant, when people condemn "gambling" on the stock market. What they mean is people with lots money investing wherever short term profits are possible and often gaming the market while doing so. So creating unexpected price changes for the actual industries needing those supplies and they obviously don't like that. But I couldn't draw a clear line between "necessary gambling" and "unnecessary gambling".
I see. Your claim that it it is entirely negative is fine to make without any support whereas my claim that there are some situations that could be positive (only one suffices) is not okay even when support has been given (any mine that is opened or distribution center that is opened employs speculation).
You are just making a bunch of claims with no support but “people I trust say so so the claims are true”. Now I really will bow out.
I am taking the null position here. That the speculation market doesn't help. If something isn't helping and is extracting value from the market its by definition detrimental. The onus is on you to provide the proof for positive positions, that the speculation market does help.
Nobody is forced to use the futures markets. The onus is on you to explain why it’s negative despite all of the sellers and buyers choosing to participate there.
I’m not a huge fan of taxes, but they are absolutely about morality. Society as a whole deciding to discourage consumption of harmful/unhealthy things like sugar, soda, cigarettes, alcohol, etc.
It’s not a requirement for consumption taxes to driven my morality as a first order effect.
It’s entirely reasonable for law to take the moral stance that people should broadly pay for the benefits as participating in organised society, so to ensure the long term upkeep and maintenance of that organisation they derive benefits from.
At which point consumption taxes have nothing to any moral judgement about the consumption of various products, but simple calculus that the voluntary consuming those products increases the cost of running our society, and so you should pay a bit more for engaging in these activities.
But none of that is judgement on the morality of activity. I personally couldn’t give a shit what drugs you or anyone else consumes. But I don’t particularly like the idea of having pick up the bill later for an activity I didn’t participate in. So if you pay some extra taxes to cover to cost of additional healthcare, then feel free to consume whatever the hell you want.
> But I don’t particularly like the idea of having pick up the bill later for an activity I didn’t participate in.
The repeated grouping of morality/ethics into purely religion/judgement throughout this thread really bothers me. IMHO your argument is an argument of moral propriety of making people pay for others choices. You’re semantically choosing to not call it that is all.
Nah I’m more than happy to agree that I’m making an argument of moral propriety. There has to be some consistent basis for forming laws, and some sort of coherent social order.
But my point is there’s a difference between moral basis for having laws and taxes, and their specific implementation. Consumption taxes are just one approach for implementing a social system build on the basis “fair contribution/usage”, or whatever we want to call it (my views on “moral” behaviour are too nuanced and confused to fit into an internet comment, so let’s just work with something simple). But the taxes themselves aren’t a direct expression of moral judgment themselves, but rather an implementation detail of a broader governing moral system that provides legitimacy to laws and the states rights to enforce them.
It might be a distinction without a difference. But if someone is going to call out consumption taxes as somehow more inherently driven by moral judgments than any other part of a system of law, then I think making the distinction is reasonable.
Morality seems more of a subjective call, e.g. "Thou shalt marry heterosexually ahead of procreation", than a stochastic analysis, e.g. "X percent of fatal car crashes involve blood alcohol above Y concentration."
What I'm after is that much of the ethics by which our legal system operates, e.g. a BAC limit for legal driving, is divorced from moral questions such as: "Is drinking beer a sinful act?"
I think you’re gravely misguided. BAC has nothing to do with sin, it’s connected to the morality and ethics of putting your fellow citizens at risk of your impaired driving.
My repeated point has been that morality != religious sin, rather the latter is a subset. I don’t necessarily agree with laws/taxes in this regard, but it’s important to understand where they come from.
Speculation and gambling is just complicated casting lots.
Predatory gambling where the participant can only win good feelings and lose money, is the immoral, addictive nightmare nobody wants. When talking about regular joes anyway. Be honest enough to sell good feelings straight.
I can't comment on the select finance bros who have manipulated the rules towards a specified outcome. Not really casting lots anymore at that point.
If it gets too corrupt all bets will be off, and that will hurt everyone who needs short term liquidity and to take speculative moon shots.
No because market 'gambling' actually impacts the outcome.
You can paint it as a bad thing but there are useful things that come out of this.
If someone wants to 'gamble' that grain prices will be higher in the future, they can buy futures. Where do these futures come from? Farmers today who want a fixed price for their future harvest.
And what about the 'gamblers' who bet that the demand for lithium is going to increase, and therefore invest in building a lithium mine?
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.
All of what you say could be true - I just find it hard to believe given IRL finance bros are constantly trading and profiting off of futures/commodities trading without a single worry of the underlying commodity.
If your claim is that 'finance bros' (perhaps let's call them commodity traders) don't consider anything about the fundamentals of the underlying, then you simply have no meaningful understand of trading.
there are two factors that control market prices: supply elasticity and demand elasticity.
commodities with inelastic supply and inelastic demand are prone to very wide price swings.
inelastic supply means that increasing prices don't increase supply. in the case of lithium, it take time to bring new production capacity online, so supply is very inelastic in the short term.
inelastic demand means that increasing prices do not decrease demand. in the case of lithium, batteries are a very valuable product, and the raw cost of lithium is a small percentage of their total value, so increasing prices for lithium do very little to reduce demand.
the price movement here is totally predictable and exactly what you would expect based on standard economic formulas taking into account supply/demand elasticity. it is not speculation or gambling.
demand went up, supply lagged, the price spiked, supply increased, the price went back down.
electric car sales may still be growing but growing at a lower rate, and projected demand growth is probably decreasing relative to projected supply, so the price is falling.
Speculating/gambling is a huge factor in anything that can be traded. But commodities also rely on physical deliveries which have influenced prices directly on various occasions. Of course for commodities also the selling side has direct influence on prices. That can go so far that for oil deliveries the tab is opened/closed on convenient times. So understanding prices is significantly more difficult than e.g. for stocks. Also speaking about the news part, a lot of data on commodities isn't freely available so you need to buy it. Trading itself on those is highly restricted - and speculative - anyway.
> Where as car sales might be stagnating but electric car sales are taking a larger portion of total car sales ie electric car sales/lithium use is still increasing.
I'm quite surprised the article doesn't mention sodium batteries. Li-Ion batteries are notorious for thermal runaways, so CATL and Tesla already shifted to LiFePO batteries quite some time ago. I think everybody would be more than happy to ditch Lithium based batteries altogether.
How so? The people physically purchasing commodities are doing so by determining how worth it is to them at the current (or future) price, same with sellers. Speculators are almost never actually taking delivery, but they are providing liquidity for buyers and sellers by participating in transactions as counterparties. The final price paid by the ultimate physical buyers is based on their own value judgment of quantity demanded per price, and the final price paid to physical sellers is based on that same price (of course, either could be willingly using futures instead of spot prices to reduce risk).
Buyers and sellers could trade directly among themselves if they wished, and if the commodity markets were divorced from reality (either unable to deliver on futures contracts or having futures settled at different prices than their contracts stipulate) nobody would use them. Because speculators don’t take delivery, how they react to news and other events is only assisting in price discovery between the time a future is issued and settled, because at settlement time there is no immediate uncertainty regarding supply and demand in the spot market.
I think you might be making a common mistake in your comment of equating news for popular consumption with actual news that traders, buyers, and sellers care about (usually very quantitative and well guarded data with nuances that an article for public consumption will never account for). Articles for popular consumption are not moving markets very much, especially in commodities where public involvement is low (vs stocks) and consequently public sentiment has little effect.
I mean, that’s a straight up cartel. There’s nothing surprising about that.
But the OP is confused about their comment about commodities in general. They are largely based on supply and demand, but most companies need to predict supply and demand months and years in advance because converting raw material into a sale to the end user is a multi month to multi year process, so a natural result is that the prices are based on speculation of supply and demand, months to years in advance.
> They are largely based on supply and demand, but most companies need to predict supply and demand months and years in advance because converting raw material into a sale to the end user is a multi month to multi year process, so a natural result is that the prices are based on speculation of supply and demand, months to years in advance.
But that practically means they are based on speculation about possible future supply and demand, and we are more or less taking it on faith that that speculation is correlated to actual supply and demand.
> But that practically means they are based on speculation about possible future supply and demand, and we are more or less taking it on faith that that speculation is correlated to actual supply and demand.
This statement almost seems tautological. Of course prices are based on speculation about possible supply and demand, nobody has a crystal ball that can tell them “actual” supply and demand.
In a competitive and liquid market, you expect prices to rapidly approach “optimal”, because otherwise there’s an opportunity there for someone make money out of the market inefficiency, buy correctly predicting when supply is high, and buying, then selling when supply is low. Which is exactly what future etc do, except without the need to actually move the physical commodity around.
> Of course prices are based on speculation about possible supply and demand, nobody has a crystal ball that can tell them “actual” supply and demand.
Exactly, no one has such a crystal ball. And this actually generally applies not just to future supply and demand, but even to the past: it's actually impossible to measure supply and demand across any significant industry, to check whether prices matched it or not.
And yet, economists and economical theory enthusiasts talk about the "law of supply and demand" as if it's some scientific observation, and not just a simplistic model that seems intuitive.
> In a competitive and liquid market, you expect prices to rapidly approach “optimal”, because otherwise there’s an opportunity there for someone make money out of the market inefficiency
You might expect that if you believe in the law of supply and demand, but as we were discussing, that is not how prices are actually formed, and anyone betting based on observed supply and demand (to the extent that it is actually possible to observe them) will be beat in general by others who are betting based on current speculation, which is how prices are actually formed.
For example, if you are betting that gain prices will increase in the winter because that's what you think they did every year, and ignore some prominent pundit predicting that they will decrease this year, you may well lose the bet if everyone else believes the pundit. And that will be true regardless of whether grain will be in low supply or not.
> You might expect that if you believe in the law of supply and demand, but as we were discussing, that is not how prices are actually formed, and anyone betting based on observed supply and demand (to the extent that it is actually possible to observe them) will be beat in general by others who are betting based on current speculation, which is how prices are actually formed.
But we do see prices approach optimal. Your argument is predicated on the idea that the law of supply and demand is only a useful model if the actual price always follows observed supply and demand. But for that to ever be true, it would require speculators to have a crystal ball, otherwise there’s no reason to believe the speculated price will always match the “optimal” when the point in time being speculated about actually occurs.
The law of supply and demand tells what market systems will trend towards. But like complex control system, having a governing idea about long term trends doesn’t mean momentary perturbations don’t occur, it just helps you understand what the system will do after the perturbation.
To claim that the law of supply and demand is useless, is like claiming that Hooks Law is useless for understanding how suspension systems in cars work, because perfect springs don’t exist, and cars don’t remain stationary.
Perfect markets don’t exist, perfect information doesn’t exist, so why would anyone expect real markets to perfectly follow the law supply and demand? And clearly markets do follow the law of supply demand at the macro level, when long periods of time are considered, otherwise commodity pricing would be entirely arbitrary and wouldn’t in anyway reflect the value of the commodity to society at large.
Where do you see that? What does it even mean, how can you objectively tell what is the optimal price for a good or service, so that you can later say that the market converged to it?
For example, is 1000$ the optimal price for an iPhone? Or is it simply the price Apple chose? If they sold it for 500$, would they make more or less money? How do you know?
> And clearly markets do follow the law of supply demand at the macro level, when long periods of time are considered, otherwise commodity pricing would be entirely arbitrary and wouldn’t in anyway reflect the value of the commodity to society at large.
I would argue that it often is, at least for many non-essential products. The price of many non-essential goods is much much higher than the price of essentials, even when those non-essential goods are cheap and easy to manufacture (say, softdrinks or many cosmetics). The price of most energy resources is largely controlled by non-market forces, even on the face of it.
Also, why restrict this discussion to commodities? If we switch to investments, the price of stocks is quite obviously arbitrary as well, with "market makers" often controlling the allowed prices (or at least, price volatility) for stock. The price of real-estate is often determined to a large extent by the price of borrowing, and that is quite explicitly set by banks and the central bank based on nothing related to supply and demand. Services are even more complex, with huge variations in price based on entirely subjective factors.
> Also, why restrict this discussion to commodities?
Because they’re generally pretty fungible, and have a larger number of sellers and buyers involved in the market, hence their markets are more likely to behave like an ideal market. The same does not apply to housing, or services.
> Where do you see that? What does it even mean, how can you objectively tell what is the optimal price for a good or service, so that you can later say that the market converged to it?
For commodities, I would point to the reasonable price stability that exists. As evidenced by the fact that basic goods don’t frequently suffer from repeated shortages or gluts of supply. Strongly indicating that the price is both high enough to incentivise production, and stable/low enough to allow for relatively low risk long term investment in production, because continuous long term demand is expected.
> For example, is 1000$ the optimal price for an iPhone? Or is it simply the price Apple chose? If they sold it for 500$, would they make more or less money? How do you know?
These is nothing about the iPhone market that suggests it’s anything close to an ideal market (for one Apple have a monopoly on iPhone sales), so I don’t know why you would expect it to behave like an ideal market.
> The price of real-estate is often determined to a large extent by the price of borrowing, and that is quite explicitly set by banks and the central bank based on nothing related to supply and demand. Services are even more complex, with huge variations in price based on entirely subjective factors.
What’s your point? Of course a law describing how ideal markets work doesn’t correctly describe markets well know for being extremely distorted and non-ideal. Next you’re going to tell me Newtons laws of motions are all useless because they can’t help you model the behaviour of objects travelling at relativistic speeds.
You seem to be struggling with the idea that a model doesn’t need to be perfect, or applicable to every real world scenario, to be useful. All models have their limits, that no surprise to anyone. That doesn’t make them useless, it just means you need to be aware of limitations, and adjust expectations appropriately.
The pundit's claims are part of the speculation. If you speculated that the pundit's words would matter, you'd short or sell out grain, making the pundit's words matter. Supply and demand are only sometimes good measures of people actually using or producing these products (and when they fail bubbles occur), but are always good measures of the spending of both people actually using the product, and the investors buying it in wanting to sell it.
In any case, as the investors buy the product they eventually have to sell it, meaning over the long run demand and supply are good measures of "actual" usage and production. You know this because there's never a bubble that doesn't collapse and return to equilibrium.
> In any case, as the investors buy the product they eventually have to sell it, meaning over the long run demand and supply are good measures of "actual" usage and production.
That's not necessarily true. It depends on the product and industry, but it's absolutely possible to horde products for long periods of time (see diamonds and gold) or to choose to destroy products rather than sell them at a price you don't like (see public transportation in many US cities in the 50s, or fancy food items).
> you may well lose the bet if everyone else believes the pundit
Can you give a real life example of when a pundit giving a predict against the actual supply that had everyone buy-in? Says, oil price goes down even when demand is hot?
The price of oil is a particularly bad example, since it is heavily controlled everywhere in the world, as is supply. The international price of oil is largely set by OPEC or the USA or a few other countries (depending on geographical region).
Also, this type of pundit influence is common with the price of stocks. It also happened with the price of natural gas in Europe last year, when it increased based on lack of confidence in reserves that turned out to be misplaced, and never really recovered.
An inverse example would be any bubble, for example the housing bubble that happened over a decade ago. Prediction of house prices going up eventually reached a point where house prices were going up, despite low "actual demand" (of course, if you count "demand for investment", then prices are absolutely a measure of that).
OPEC is a cartel constraining supply to increase prices, it's not a free market but an example of "demand and supply" in it's most brutal form. OPEC prices are not about "gambling".
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.
Are they any different than the Isp and telcos in the states or Walmart, Amazon, Alphabet, Apple, Microsoft or payment service providers like mastercard and visa all of them work as cartels or monopolies. All these companies cost Americans more than when OPEC manipulate oil prices I think
It's interesting to see that people still believe there is some type of fair price discovery when things like dark pools, market maker exemptions, naked shorting, tokenized securities, trillions in derrivative bets (hello 2008), spoofing (JP Morgan getting fined 1 billion after making 10 billion in profit in gold price spoofing) and so on and so forth exist.
Speculation and gambling about what future prices will be are not the big issues here, the markets themselves are completely broken (by design).
You just listed a bunch scary sounding financial buzz words, but I doubt that a thorough analysis of them would support your conclusion.
In fact, many have the opposite effect and result in more efficient price discovery. Take naked shorting for example. Without shorting, it would be far more difficult for an equity research firm to be incentivized to look into fraudulent stocks, as was widespread with Chinese companies a few years ago. Without their efforts, stock prices would have remained inflated for longer.
You don't understand what naked shorting is. Naked shorting is shorting without first borrowing from someone. Normal shorting is limited by the availability of stock to borrow (by the way, if stock holders wish, they can request from their broker that their stock won't be available for borrowing, potentially causing short squeeze), by the interest rates on borrowing the stock.
Naked shorting skips it all. Some market makers are privileged and can sell stock they don't own and didn't borrow. So they have a privilege of printing stocks in the short term, and that's quite broken, and many of them abused this position to manipulate markets. Normal participants in the market can't naked short.
Naked shorting means that the market maker who supposedly sold you a stock, can now fail to find the stock he sold you, leading to "fail to deliver".
The excuse given is that naked shorting allows for more liquidity, but given the other problems, I think it's bad.
> excuse given is that naked shorting allows for more liquidity, but given the other problems, I think it's bad
I assume you have a counterpoint to the decades of data the NYSE, SEC, Financial Crisis Inquiry Commission and others around the world have collected that show naked shorting improves liquidity without FTDs negatively impacting price discovery while tamping volatility, evidence made particularly robust by the fact that naked shorting is permanently banned, and has been temporarily banned, in many markets, such as Australia, Switzerland and, for some stocks post crisis, in the United States? (See Wikipedia for a summary.) The whole affair reminds me of the lead up to the Onion Futures Act [1].
Isn’t that argument somewhat strange or dishonest? To paraphrase you: I‘d rather have naked shorting and the associated manipulation and problems with it than better price discovery for stockholders.
In your example, the stockholder isn’t protected either, only an equity firm derives profit from this information. In a more ideal world the stockholders themselves would do this due diligence, which is something that already happens.
Also there’s differences between shorting and naked shorting. I could well imagine allowing fully hedged shorting and outlawing naked shorting. Especially considering the issue of fail to deliver, that’s just absurd with our technology.
No one designed this system. It grew, organically. People started recognizing parts of it they could take advantage of, and pushing to have those parts become more prominent, largely individually (as opposed to in one grand conspiracy of collusion).
It may be true that some of those people believe it is in their best interests that the markets be "broken", and so have pushed that far intentionally, but there is no one overriding will and no single hand on the rudder to even be able to do that on purpose. It's all just greedy people trying to get their own interests put before everyone else's.
> wouldn’t it be better if the volume at least is shown on open exchanges?
Empirically, no. Large blocks of stock don’t have a liquid market. Forcing them into the open means chopping it into tiny pieces while using derivatives to hedge, for the sophisticated, and getting hosed, for the unsophisticated.
Insider trading involves trading that violates a fiduciary responsibility. That is: you work for a company owned by shareholders, and you trade based on information you have as a consequence of that employment, harming the shareholders.
Without that fiduciary responsibility, it's not insider trading, it's just trading. If you overhear someone with inside information talking about some inside knowledge, then trade based on that, you're in the clear (as long as you didn't collude with the leaker.)
We aren't rushing to make nuclear fusion because we have insufficient electricity... and you can't replace what the scientists know with another coal plant.
Global survelliance, inifinte database records and instant comms has really destroyed the potential to keep and develop real secrets. It's going to hurt (badly) in the long run.
So insider trading for as long as GCHQ/CIA/NSA refuses to rat people out....
Forgot about the “no one else” knows part, but the point is being good at something (or knowing something others do not) is not a bad thing, as implied by “insider trading”.
For example, if you figure out a cheaper alternative to lithium, and want to bet that lithium prices will fall as a result of reduced demand, then those are your spoils for figuring that out.
Price increase is governed by how much a buyer is willing to pay and how long a seller is willing to hold. That is supply and demand. Their reason to supply or demand is 100% due to speculation or gambling or whatever you want to call it. There is no intrinsic value for anything. Supply and demand is not a magic spell that saves people from guessing what prices should be.
> the biggest movement in prices is not because of demand and supply but rather because of speculation and gambling
the movement reflects the expected future supply and demand at the time.
The speculation is something that financial engineers use to offload the risks of such commodities from one party to another (such as from producers to consumers of said commodities).
With the way derivatives are used these days to speculate/gamble they do not help rather result in the boom bust cycles we see in more and more industries these days.
Batteries has a long supply chain, and in this case the market is forecasting a drop in demand. Due to more sources and increase output in the early stages of the chain, the offer has increased.
Note also the article refer explicit to EV in different paragraphs .
it's described in the article.
> with the expiry of a more than decade-long programme of subsidies for EV purchases.
> the expanding supply outlook for the metal is mainly what is pushing prices lower this year
> Supply is coming on stream faster than you can say ‘boo’.
> first-ever lithium deposit to be discovered in Iran’s mountainous western province of Hamedan. At an estimated 8.5 million tonnes,
> China is also expanding its lithium-supply capacity from lepidolite, which, while considered the most abundant lithium-bearing mineral,
You're definitely right that the news loves to write headlines after any daily price fluctuations and pretend they know the reason, when in reality it usually explains nothing and becomes irrelevant by tomorrow.
Your two premises don’t necessarily relate to each other. I believe both:
- journalists attribute price changes to whatever story they can find. Sort of like how every day there’s a story of why the Dow moved by a fraction of a percent.
- price moves are almost entirely supply and demand. Sure, speculation can change price in the near term, but considering the size of these commodity markets, you’d have to believe an absolutely enormous amount of capital is at play in speculation.
Markets in a high energy cost environement make their margin more on volatility and speculation.
You will also see margins themselves widen until the system falls in on itself.
We dont have a financial margin tracker.
Also increasing interest rates in a highly indebted economy increases inflation; short term by widening of margins and long term by offputting energy extraction.
Monopoly and cartels has the most impact on prices. and the market can not work if there are few partisipants.
also gatekeepers, those that stand in between producers and consumers can screw up the market if they have a large potion of the market.
car manufacturers seeing the same sales data would then secure lithium supply 12 months ahead for an expected 12x growth, which then turns out to be only 5x. From macro data pov, the graph is still trending up. This is why guidance is important and also why lithium miners hedge against their inventory using future market. Supply and demand still applies, just that its effect is being amplified by overleveraged commodities trading market.
The quote from the article below [1] demonstrates why the doomers, degrowers, Neo-Malthusians, etc. keep getting resource scarcity wrong. They keep quoting the "proven reserves" numbers [2] that only count what is extractable with current tech at current prices, factoring out new technologies / techniques, as well as reserves not discovered yet or discovered but not yet "proven".
[1] "But while demand for lithium has been subdued, many believe the expanding supply outlook for the metal is mainly what is pushing prices lower this year, with a wave of fresh supply expected to come online from facilities in China, Australia and Chile. Five analyst forecasts, including ones from Bank of America (BofA), JPMorgan Chase and Morgan Stanley that were reviewed by Bloomberg in mid-January, for instance, anticipated production increases of between 22 percent and 42 percent in 2023 alone. “Supply is coming on stream faster than you can say ‘boo’. Demand remains strong, but prices have been unsustainable for some time now,” analyst Dylan Kelly of Ord Minnett recently told Mining.com."
Once upon a time, my conception of oil drilling was roughly that there were these giant tanks of oil underground, and to extract it we more or less stuck a straw down and sucked it out. And that one day, the well would make the same sound as the straw as you're finishing a milkshake, and we would suddenly have no more oil available.
Then circa 2002 I got a job at an oil well services company, and learned a lot of complexities about oil drilling. A key insight is that not all oil is equally economic to extract, and therefore the amount of oil available to extract is only fixed for a given price and set of technologies. As prices go up, the amount of available oil goes up too; as technology invariably marches forward, the amount of available oil goes up.
This behaves nicely with the control system we call the free market. As oil gets used up, prices will go up, which will unlock more available oil acting as negative feedback. At the higher price, some oil users will find a different solution to their problem, while other oil users will grumble and pay up, acting as a second source of negative feedback. This process repeats as the available oil at the new price point is exhausted.
This same pattern exists for essentially all mined resources. We're not going to one day run out of cobalt or lithium or whatever. As mines that are economic at current prices shut down, its price will go up, and some users will find an alternative, while others will grumble and pay. The higher prices will enable mines that weren't viable at the lower prices.
Pedantically, there is a "limited" amount of these resources right? Like "if you drill deep enough there's always more" feels incompatible with the fact that these resources are all downstream of actual geological effects.
Or is it really actually "dig deep enough and we find stuff" has almost always been true, making this distinction without a difference?
Just can't help thinking about lakes and acquifers drying up. Even in a more "renewable" scenario, at one point there is a bottom. I just wonder if we have a good feeling for where that is .
Sure, for any sort of mineral or metal there's a hard limit to how much there is in the Earth's crust, and while the oil was created by a natural process, that process doesn't take place on a time frame that's useful to humans (and might not take place at all now that bacteria has evolved).
We don't sit around fretting about the limited supply of palladium or something, because there's never been as much of it that was easy to extract as we wanted. We do worry about lithium, because right now it's economic to extract it in very large quantities and we know that won't last forever. But my point is that we won't transition from the current abundance to "every last atom of mineable lithium has been extracted and if you want more you have to dig up a landfill and pull it out of discarded CR2032 batteries" overnight. When we've dug up all the lithium available at the current price, there will still be plenty more at a slightly higher price, and when that's used up, there will be more at a price slightly higher still, and so on. Yeah, there's a limit, but long before we hit the limit, the gradual price increases will have push society to find a way to go on without copious amounts of newly mined lithium.
It's not just economic cost, it's also energy cost (the EROI). It costs some % of a barrel of oil just to pump up a new barrel of oil. When that ratio is 100%, you can no longer pump oil for energy, though you might still pump it for the raw materials, or to convert a different source of energy into tasty gasoline.
So there probably always be oil remaining in the ground that costs too much energy to extract.
In the “infinite energy” argument, there is some notion of “well I can use solar energy to get this oil, which has different characteristics, even if the energy is less overall”. Not all energy sources are fungible, right? But it’s a good point
Even with no changes in tech the 'proven reserves' are way less than the amount of minable stuff out there as turning an area of land with say gold in into proven reserves involves drilling a load of holes in it and sending the drill cores off to be analyzed which is expensive and so only done on the bit you are about to mine.
See, this is it right here, you're doing it! You're resorting to extremist hyperbole, when what matters are actual details.
Resources are not infinite, but that is not relevant. What is relevant is the (finite) amount and the rate at which they are used.
To go hyperbolic in the other direction, if there are a trillion accessible grams of something and humanity uses a kilogram a year, then we won't run out for a billion years.
But both your hyperbole and mine are pointless. The question can't be answered without the actual details. Your argument is just "resources aren't infinite so we shouldn't use any of them!" That's not a good argument.
Another thing people often seem to miss when comparing lithium for batteries to oil for combustion, is that lithium is not a fuel in a battery, it's a vessel. It doesn't get burned up. Whether we can recycle it efficiently enough is a big open question, but it's not gone the way fossil fuels are.
Straw man fallacy. Your parent comment didn’t make that argument, only that resources are relatively more plentiful than the assumptions that many people make. I would argue the GP is correct.
Technological advances in the 1970s in agriculture (incl. genetic engineering of more nutritious yellow rice, artificial fertilizer from petrol products, improved planting density) allowed us to increase food staple yields. These improvements have expanded world food yields to double the amount of population that can be sustained by the current number of farm operations.
Fracking and horizontal drilling have made US oil/gas drilling (not just pumping of existing wells) profitable again. The explosion of cheap oil in the 2010s (and the cratering of oil prices in Trump’s term) was created by this technology. Fracking isn’t as cheap as the cheapest pumping in the world (probably Saudi light oil), so assumptions must be made about prices and when this technology can add to the world supply. But re-pressurizing existing wells (which is what fracking is) had been tried for 50+ years and only around 2005+/- did the technology work to make it become profitable.
Both of these are examples of modern technology that has bent the supply curve by breaking the simple, fixed assumptions of some economists. And no, no one thinks the supply curve bends infinitely.
Lithium Triangle[1]. "a region of the Andes that is rich in lithium reserves, encompassed by the borders of Argentina, Bolivia, and Chile.[1] The lithium in the triangle is concentrated in various salt pans that exist along the Atacama Desert and neighboring arid areas, the largest areas including Salar de Uyuni in Bolivia, Salar de Atacama in Chile, and Salar del Hombre Muerto in Argentina.
The area is thought to hold around 54% of the world's lithium reserves."
Well, not any more maybe. A large lithium deposit has been dis-covered in Iran as the internationalbanker article notes. (Unusal hyphenation of discovered intentional: it was uncovered, made more widely known, rather than found for the first time ever.) Now that it's in demand, no doubt there are many more deposits of lithium waiting for the limelight.
Wikipedia continues: "By one estimate Argentina could displace Chile as the second largest lithium producer by 2027.[3] Similarly, there are estimates the posits [sic] Argentina producing 16% of the World's lithium by 2030, instead of 6% as in 2021.[3] Low royalty payments when compared to Chile are cited by The Economist as a particular advantage.[3]"
Iran is not a reserve it may well be a resource but a long way from being a Jorc etc reserve.
Also that lithium triangle is still a historic artefact of lithiums previous life as a really good lubricant and anti depressant. Given lithiums importance these days, more and more hard rock deposits will be found.
For the xth time in yth year There is no lithium shortage. Up until a decade ago we weren’t even looking for it. Now that there is money to be had we will find it.
A huge factor is accessibility of reserves. Often new discoveries are so remote and inaccessible that they are completely unrealistic to be producing within the next 10/20 years. I think both Iran and Argentina fall into this category.
Not a great article (from a minerals and resources perspective).
Two specific factors; recent mine expansion at sites that dig in the dirt and produce concentrates _and_ recent and near future expansion of processing locations that take concentrates and refine to ship usable lithium.
Eg: Minesite in Western Australia currently ships concentrates to Malaysia and will soon ship also Texas.
Shipping concentrates is pretty standard in mining low-grade resources. Near the mine, there's usually some kind of plant to extract the good stuff and discard the dirt.
Otherwise, there's a huge amount of wasted effort shipping dirt and rocks around, and dumping them someplace.
What's shipped out usually needs more processing. What's left behind is usually the big environmental headache with mining.
Lithium traditionally has seen refinment of concentrates take place some distance from the primary hole in the ground; Western Australia is soon opening refinement facilities "not far" (couple of hundred km) from the primary mine (Greenbushes).
Generally digging hole -> concentrate (in this case (Lithium) the concentrate is Spodumene) is a largely mechanical process - crushing, grinding, screening, centrifuge, seperation, etc and what's left behind is overburden and not of interest tailings - this is "regular mining problems" and these are not huge in todays regulated environment, post mining rehab is required and ideally pre mine eco systems come back.
Refinement of concentrates, particulalry of Rare Earths is generally where nasty chemicals come into play which requires tight processing and strong oversight to keep "clean" .. acids at end of re-re-re-use need to be nuetralised and processing areas need strong under-pan barriers to prevent spills leaching down to groundwater, tailings dams need to be strong, monitored, and regularly dealt with.
These are all things which are "all right" in theory and good practice .. but do require strong oversight and an educated third party invested public keep a close eye on transparent operations.
Sodium batteries will have any effect only in a few years. So this is mostly the case of increased production in anticipation of stronger demand that has not realized.
The latter is not necessary an indication of a less demand for batteries. There were a lot of progress recently in increase of the energy density in mass-produced batteries, and that may contributed to lessening of the demand.
Has there been a commodity that has spiked in price due to true lack of supply and non new supplies were found? From peak oil, to copper , lithium and rare earth minerals predictions of we will run out during a price shock always seem to turn into a price collapse.
> "Mid-February also saw reports emerge that the world’s biggest lithium-ion battery manufacturer, China’s CATL (Contemporary Amperex Technology Co., Limited), had begun offering discounts on batteries sold to certain Chinese EV companies, such as Nio Inc. (NIO) and Zeekr, thus reflecting the ongoing downturn in the lithium price. Such discounts are reportedly being offered to enable CATL’s customers to lock in battery purchases—the most expensive component of EVs—at below-market prices if they agree to purchase at least 80 percent of the batteries they require for their EVs from CATL, on the assumption that lithium-carbonate prices will continue falling significantly."
In the U.S. I think this would be quite illegal. I realize China is different, but it's still interesting to see this kind of thing out in the open as if it's normal. (The closest situation I can think of is when Intel was sued by AMD by offering discounts on CPUs to manufacturers that didn't use AMD products[1]. Intel settled with AMD for 1.25 billion dollars.)
What the article does not mention: in June a new chinese emission standard for vehicles, that can hardly be met by combustion engines, will hit. That may drive up the Lithium demand.
And in 23Q4 or 24Q1 CATL will sell its 500 Wh/kg batteries. Although I couldn't find much about the chemistry of the new cells, that may cut the Lithium demand in half. But not very fast, I guess.
Assuming the denser batteries have the same amount of lithium per kg, I don't see how we'll see a halving of lithium demand. That would only be possible under the incorrect assumption that battery demand is static.
That's already not true with current technology as EVs are gaining market shares rapidly, but also the new technology will be opening new usages, so it will opening new markets, further driving the demand.
Yes, it may cut the Lithium demand in half, if the demand does not change (much), and that is not likely. Sorry for the not so well formulated statement. I meant that that may lower the inclination of the curve of Lithium demand significantly.
Let's assume "from the internet" estimate is at least somewhat correct, and the average EV battery contains 10kg of lithium (this is rounding up the more common 8kg estimate to make it easier to count).
The collapse in lithium prices could mean that the electric car market has been overvalued and that the actual production of electric cars is much lower than 12 million, because lithium batteries are not only used in cars.
Nothing, over time, prices will still begin to rise. Even though the technology and business of recycling lithium from used batteries will somehow develop.
And for sure, this decline will not affect the price of batteries in any way.
Over 85% of lithium is produced by just 2 international corporations with large scale mines complying with multiple international regulation requirements.