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That’s an irrelevant question. I hate that I’m still bothering to respond when you don’t seem interested in changing your position. There is a fixed cost to ex

That’s an irrelevant question. I hate that I’m still bothering to respond when you don’t seem interested in changing your position. There is a fixed cost to extract a kilogram of lithium using a given method. When demand spikes, lithium suppliers will charge more and reinvest those profits into increasing mining capacity. If they had their way, they’d keep prices high, but anyone can open a lithium mine. Lithium is not hard to find. Those people will undercut the previous miner in order to attract buyers, which will force all miners to lower prices back to reality. As long as prices are high, more and more mines will open as it is suddenly an attractive resource to mine. This will happen until prices start to drop to some percentage-over-cost where things stop being attractive, and the market reaches equilibrium again. If lithium was profitable to mine for $X/kg for many years, then that is the price it will naturally return to. It is a commodity. There is no special value for getting your lithium from Corporation X or Corporation Y. The only value is the material. That’s how commodities work. The price is determined by how hard it is to extract, and whether demand has recently spiked (or subsided). Gold is expensive because it If this were some rare substance, extraction difficulty would increase noticeably with time, but we’re a long way from a shortage of ways to mine lithium. Some ways might be more expensive, so those mines will only open if the prices stay high, but the prices won’t rise indefinitely this century. That is such an illogical assumption. Perhaps the natural price of high volume lithium production is higher than we have today because those more expensive methods are convenient, but it won’t be enough of a price increase to matter in the grand scheme of things, and this assumption of a higher price is a pretty flimsy one to base predictions on even then. Eventually, as batteries age, they will be recycled, and the need for lithium mining will likely drop sharply, bankrupting some of these mines until production and (profitable) demand are matched again.

Manuel_D 4y ago
Higher prices would indeed incentivize increased demand. But again, this requires higher prices. Understand that renewable activists are predicting that lithium battery production will not only increase exponentially, it will also exponentially drop in cost per KWh as this happens. This is not going to happen because, as you point out, lithium mining will only expand if prices climb higher to make otherwise unprofitable reserves profitable. And since raw materials now dominate the cost of batteries, this is going to increase the cost of batteries. There's no having your cake and eating it too: in order to increase lithium mining capacity, battery cost is going to have to grow, not shrink. You edited your post after I replied, so I'll have to edit in response: There's no one "difficulty of extraction" factor for each commodity. The reality is that there's a diverse variety of reserves all of which are easier or harder to exploit, even for the same commodity. "The price is determined by how hard it is to extract" is at best a huge simplification. Higher commodity prices make it viable to extract the more inaccessible reserves, but those reserves will only be profitable so long as prices remain high. > If lithium was profitable to mine for $X/kg for many years, then that is the price it will naturally return to. Nope! This is completely wrong. Commodities don't "naturally return" to any price. Prices is a result of supply and demand. It could be we find some other battery chemistry that blows lithium out of the water. In that case the cost of lithium will probably collapse well below $X/kg. Conversely, if countries start to try and provision significant amounts of grid battery storage, the costs will grow even higher as more and more inaccessible reserves need to be exploited to supply market demand. There is no "natural" price of commodities, whatsoever. If the demand for lithium is going to rise and keep rising, then the cost will rise and keep rising unless some breakthrough makes it way more efficient to mine. Given the fact that we've been mining for centuries and we have huge demand for minerals other than lithium, I'm not optimistic on a 100x improvement in mining efficiency.
- coder543 4y ago
  The prices have gone up, so mining is expanding. There’s a clear next step to the way commodities work. That next step is not for prices to continue increasing dramatically, things should level off and eventually return to normal, as I explained. > Understand that renewable activists are predicting that lithium battery production will not only increase exponentially, it will also exponentially drop in cost per KWh as this happens. Battery prices don’t need to keep dropping for them to take over the world. They’re already cheap. Of course people would love for the prices to drop, and they have historically been dropping slowly, but the basic elements will cost a certain amount, so there is a price floor. I don’t know where that is, but it is lower than we’ve seen, because every step in the battery production chain has been making a profit up to this point, including the miners. The fact that prices have increased only indicates a mismatch between supply and demand, not that the natural price needs to be this high, or that it needs to continue rising. As I pointed out, everyone was already profitable at a lower battery price than what we have today. If batteries are expensive because of lithium, more lithium mines will open and drop the price. If batteries are expensive because the battery makers are price gouging, someone else will undercut them. The main concern for something like this is market distortion by patents. If the best way to make batteries is locked behind a patent, that can cause prices to be unnaturally high. This concern does not apply to elemental lithium. > Higher commodity prices make it viable to extract the more inaccessible reserves, but those reserves will only be profitable so long as prices remain high. You’re practically quoting my comment to me. I addressed that. It is possible that the price will settle higher than it is today if those methods play a big role, but it won’t matter. You don’t seem to appreciate how insanely cost effective batteries already are today. A modest price increase is fine, but it is still illogical to assume prices will stay high. Lithium is not hard to find. Why would the market settle on expensive extraction methods? It is a strange assumption to start from. We’re not talking about something that’s rare. Either way, the outcome is unchanged unless batteries increase in price exponentially, as your earlier comments apparently assumed.
  - Manuel_D 4y ago
    For the second time, there is no "natural price". You need to iron this kind of wishful thinking out of your head. Companies want to buy more and more lithium, so unless you've got some breakthrough that makes mining a heck of a lot cheaper the cost will keep going up and up as more and more inaccessible reserves need to be exploited. If I have a reserve that costs $4/kg to operate when the price is $5/kg and another reserve that costs $7/kg, I may open the latter if the price rises to $8/kg. But if the price drops back down to $5/kg it's unprofitable to operate. Here's a way to articulate this that might better mesh with your mental model. The "natural price" of a commodity isn't static. If demand increases and the only way to meet demand is to use more and more expensive mining operations, then this raises the "natural price". As per the above example, the "natural price" rose to $8. It won't drop back below $8/kg unless either we find a way to make mining cheaper, or demand drops back to levels that can be satisfied by my cheaper-to-operate reserve.

Manuel_D 4y ago

Higher prices would indeed incentivize increased demand. But again, this requires higher prices. Understand that renewable activists are predicting that lithium battery production will not only increase exponentially, it will also exponentially drop in cost per KWh as this happens. This is not going to happen because, as you point out, lithium mining will only expand if prices climb higher to make otherwise unprofitable reserves profitable. And since raw materials now dominate the cost of batteries, this is going to increase the cost of batteries. There's no having your cake and eating it too: in order to increase lithium mining capacity, battery cost is going to have to grow, not shrink. You edited your post after I replied, so I'll have to edit in response: There's no one "difficulty of extraction" factor for each commodity. The reality is that there's a diverse variety of reserves all of which are easier or harder to exploit, even for the same commodity. "The price is determined by how hard it is to extract" is at best a huge simplification. Higher commodity prices make it viable to extract the more inaccessible reserves, but those reserves will only be profitable so long as prices remain high. > If lithium was profitable to mine for $X/kg for many years, then that is the price it will naturally return to. Nope! This is completely wrong. Commodities don't "naturally return" to any price. Prices is a result of supply and demand. It could be we find some other battery chemistry that blows lithium out of the water. In that case the cost of lithium will probably collapse well below $X/kg. Conversely, if countries start to try and provision significant amounts of grid battery storage, the costs will grow even higher as more and more inaccessible reserves need to be exploited to supply market demand. There is no "natural" price of commodities, whatsoever. If the demand for lithium is going to rise and keep rising, then the cost will rise and keep rising unless some breakthrough makes it way more efficient to mine. Given the fact that we've been mining for centuries and we have huge demand for minerals other than lithium, I'm not optimistic on a 100x improvement in mining efficiency.

coder543 4y ago
The prices have gone up, so mining is expanding. There’s a clear next step to the way commodities work. That next step is not for prices to continue increasing dramatically, things should level off and eventually return to normal, as I explained. > Understand that renewable activists are predicting that lithium battery production will not only increase exponentially, it will also exponentially drop in cost per KWh as this happens. Battery prices don’t need to keep dropping for them to take over the world. They’re already cheap. Of course people would love for the prices to drop, and they have historically been dropping slowly, but the basic elements will cost a certain amount, so there is a price floor. I don’t know where that is, but it is lower than we’ve seen, because every step in the battery production chain has been making a profit up to this point, including the miners. The fact that prices have increased only indicates a mismatch between supply and demand, not that the natural price needs to be this high, or that it needs to continue rising. As I pointed out, everyone was already profitable at a lower battery price than what we have today. If batteries are expensive because of lithium, more lithium mines will open and drop the price. If batteries are expensive because the battery makers are price gouging, someone else will undercut them. The main concern for something like this is market distortion by patents. If the best way to make batteries is locked behind a patent, that can cause prices to be unnaturally high. This concern does not apply to elemental lithium. > Higher commodity prices make it viable to extract the more inaccessible reserves, but those reserves will only be profitable so long as prices remain high. You’re practically quoting my comment to me. I addressed that. It is possible that the price will settle higher than it is today if those methods play a big role, but it won’t matter. You don’t seem to appreciate how insanely cost effective batteries already are today. A modest price increase is fine, but it is still illogical to assume prices will stay high. Lithium is not hard to find. Why would the market settle on expensive extraction methods? It is a strange assumption to start from. We’re not talking about something that’s rare. Either way, the outcome is unchanged unless batteries increase in price exponentially, as your earlier comments apparently assumed.
- Manuel_D 4y ago
  For the second time, there is no "natural price". You need to iron this kind of wishful thinking out of your head. Companies want to buy more and more lithium, so unless you've got some breakthrough that makes mining a heck of a lot cheaper the cost will keep going up and up as more and more inaccessible reserves need to be exploited. If I have a reserve that costs $4/kg to operate when the price is $5/kg and another reserve that costs $7/kg, I may open the latter if the price rises to $8/kg. But if the price drops back down to $5/kg it's unprofitable to operate. Here's a way to articulate this that might better mesh with your mental model. The "natural price" of a commodity isn't static. If demand increases and the only way to meet demand is to use more and more expensive mining operations, then this raises the "natural price". As per the above example, the "natural price" rose to $8. It won't drop back below $8/kg unless either we find a way to make mining cheaper, or demand drops back to levels that can be satisfied by my cheaper-to-operate reserve.