Producers thoughts on Goldman Sachs oversupply call

A recent report from investment bank Goldman Sachs (NYSE:GS) brought back the debate about a potential lithium oversupply, with some experts strongly disagreeing with the analysts assessment of the industry. But it isn’t the first time analysts have made an oversupply call in this market, with some remembering Morgan Stanley’s 2018’s views of lithium.

When asked about their thoughts on the report, Albemarle’s Eric Norris said that on the demand side, Goldman Sachs numbers are much lower that what the company sees in the future. “We think you are wrong,” he said at the Fastmarkets event.

On the supply side, the bank’s numbers are not as different in aggregate, but their makeup is not the same, Norris explained.

“If prices go to where Goldman Sachs says they are going to go, we are in trouble,” he said. The bank is calling for a crash in lithium prices to an average of just over US$16,000 per MT by 2023. “If you believe in EVs, we are in trouble because (that price level) cannot support some of the higher cost projects.”

Livent’s Antoniazzi agreed, saying he also has a very different view on the market than the investment bank’s analysts. “The lithium extraction in China we don’t view as optimistic as Goldman Sachs described in the report,” he said, adding that impurities, quality and cost curves were all challenges in some of China's lithium resources.

Global supply growth needed

In contrast to the oversupply worries exposed by Goldman Sachs, Norris of Albemarle said that to keep up with demand, every existing producer supplying the market today must double every two to three years for the next decade.

“No producer has been able to do that reliably to date,” he told the audience in Phoenix during his keynote presentation.

Albemarle plans to build a processing plant with 100,000 MT of annual capacity in the US, where the company also owns lithium brine operations. The Charlotte-headquartered company is aiming to increase its lithium production capacity five times to 500,000 MT per year by 2030.

And it is not only Albemarle and SQM calling for more supply around the world. Chinese top producer Ganfeng (OTC Pink:GNENF,SZSE:002460), whose primary source of lithium raw materials is Mount Marion in Western Australia, also agrees.

“We need a lot of lithium to be produced and extracted all over the world, and this will require cooperation between partners and countries,” Wang Xiaoshen of Ganfeng Lithium said. “This used to be a very small industry … the lack of talent, human resources, technology … We need to cooperate together to produce more lithium.”

Ganfeng’s partner Pilbara Minerals (ASX:PLS,OTC Pink:PILBF) was also present at this year’s Fastmarkets lithium event and highlighted the need to build an ecosystem with the cooperation of every actor in the supply chain.

“We are seeing the industry grow in all directions, and because of that we are seeing ambitions collide with realities,” said Dale Henderson of Pilbara Minerals, which operates its 100 percent owned Pilgangoora lithium-tantalum asset in Western Australia.