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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
by 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 agoFor 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.
- coder543 4y agoYou have too many assumptions about the availability of lithium, and lack of “easy” reserves. That’s the fundamental disconnect here. Lithium is not inaccesible, and it is super common. The “hard” ways to mine lithium aren’t that hard. We’re not talking about gold or platinum, where your discussion points would be relevant. I’m not wishing over here. But anyways, I’ve tried to explain the reason why the market disagrees with you, and why people are rapidly seeking to integrate batteries into the grid and into cars, which would not be possible if you were correct about lithium becoming insanely expensive. Battery production will keep scaling at a huge rate, and the prices will be fine. A modest price increase is irrelevant to anything discussed here today.
- Manuel_D 4y agoLithium is far from easy to extract. It also needs to be refined on-site because its raw form is too low-density to economically transport. So most lithium mines require large amounts of water to fill brine pools. The number of sites that are actually viable to produce lithium are not nearly so common. Again, the market disagrees with you not me. Lithium commodity prices are rising, and so are battery prices. People are indeed seeking to integrate batteries into the grid - I'm not disputing that. I'm pointing out that these batteries are actually becoming more expensive [1], not less and it's unlikely this trend will reverse on a dime. 1. https://www.utilitydive.com/news/new-york-battery-storage-costs-rise-interconnection-queue-12-gw/621954/ https://www.utilitydive.com/news/new-york-battery-storage-co...
- coder543 4y agoCommodity prices are rising… causing more mines to open… causing more supply… which will cause prices to drop. Why do you keep pointing to that? Your argument makes no sense. That’s how commodities scale.
- Manuel_D 4y ago> Commodity prices are rising… causing more mines to open… Yes. > causing more supply… Yes > which will cause prices to drop. Nope! Remember, the expanded supply is only profitable to operate at higher prices. So the price will drop if demand drops and then supplier will operate the more efficient extraction sites. But if demand stays high, so will prices.