In order to bear in mind, there were about, I think we counted 70 battery manufacturers in China, not only these, some of them are in stationary storage and other applications. And you’ve, I’m sure, seen a lot of commentary pushing from Chinese policymakers for some consolidation in this entire supply chain. There’s no doubt there’s been financial pressures on some. And those that have attempted to survive by lowering their unit cost, building cells, and then trying to find business for them don’t seem to have been particularly successful with that strategy. And financial pressures appear to have caught up with them in the second half of the year, forcing them to liquidate this inventory largely to stay alive. I don’t think they all will stay alive, but that’s sort of a trend that we’ve seen happening.
Chris Kapsch: Okay, thanks for that and then my follow-up question is just on your, your portrayal of the industry, certainly more sanguine than, I don’t know how to describe it, the anxiety-infused mood of the stock market that’s just devaluing lithium equities right now. So I’m curious if one of the themes that feeds into that, that investor sentiment is just more about perceptions of slowdown in North America, where your commentary is a little bit more about China, where the market is bigger. So, but I’m wondering if you’re seeing or acknowledging any slowdown in demand in North America based on your conversations with that ecosystem and a little bit more nuanced to the extent that there is slowdown and it’s about the price points, we seem tough to lower the prices that are needed to get these EVs more within reach of mainstream consumers.
One way to do that is to reduce battery costs. One way to reduce battery costs is LFP over NMC. I’m wondering if that whole theme is manifesting in a way that’s shifting a little bit of the market in North America more towards LFP based on your commercial engagements with these customers. Sorry for the nuances, but.
Paul Graves: No, no, look, a lot of questions in there, but let me tackle a couple of them, maybe in reverse order. I don’t see any change in the LFP versus high nickel trend. We always expected lower nickel batteries, whether it’s LFP or others, to be an important part of the lower cost vehicle market, the high volume market. So I still expect that to be the case. And the high nickel expectations and therefore the lithium hydroxide expectations. I have to be a little bit careful with this, right, because I can go back two or three years and sometimes important, one problem with the lithium industry is, as we don’t really have a precedent for it out there over the last 20 years or 30 years, but what we are starting to see now is at least we’re seeing some cycles that are going through sort of, if you will, some kind of EV or energy storage cycles rather than other industrial application cycles and what we’re seeing in here, and we go back and look at the last five or six years, which feels like a lifetime to some of us and we compare the first conversations we had with OEMs, maybe not even two or three years ago, and they would share with us their expectation for the lithium hydroxide demand in, let’s say, ’27 or ’28 and in that two or three years, their expectations for that number has more than tripled on a customer by customer basis.
We never thought that was achievable. We never seen that that is going to be possible in terms of building a supply chain that quickly. We have always had big chunks of some of these independent or individual OEM statements about what their capabilities are and so for us at least, and that’s why it’s a difficult conversation. When we say we don’t really see the market developing in any different way than what we expected, we’re very sensitive to the fact that what we expected may not be what the market expected, but we’ve tried to be relatively transparent about this, that we don’t see, we see supply continuing to be the constraint on demand. And we see today supply will be the constraint on demand for the next few years, for the foreseeable future.
I don’t think really changes in sentiment with the major OEMs are particularly dramatic. I think they are a natural part of the process of the teething problems that North America is absolutely going to go through in this inevitable transition to EVs, whether it’s smaller, cheaper vehicles or not, whether it’s challenges with charging infrastructure that need to be addressed first over the next few years. These are all bumps in the road, but the long-term trend is not impacted at all, to be honest, Chris, by this.
Operator: Thank you. We go next now to Corinne Blanchard at Deutsche Bank.
Corinne Blanchard: Hey, good afternoon, thank you for taking my question. Could you go back a little bit on the guidance revision? I think you mentioned and you focused quite a lot on the volume impacting most of it, but could you give us the tech input, to other low end and the high end of the guidance?
Paul Graves: So Gilberto do you awnt to take that?
Gilberto Antoniazzi: Yeah, so Corinne, in terms of the guidance, the revision down is again, primarily driven by volume and the way you got to look at that is, we’re taking approximately 3,500 metric tons down in terms of volume for this year and that’s primarily what is driving our revenue and EBITDA down for this year. And from an EBITDA perspective, by losing this volume, part of this has been offset by improved costs that we’re getting, particularly for some inputs that we use in butyllithium and even on hydroxide and carbonate production, and the lower royalties in Argentina. So pretty much from a revenue perspective, is 3,500 metric tons of LCEs and from an EBITDA perspective is the price, the benefit impact of this 3,500 metric tons, offset by cost improvement that we’re achieving throughout this year, throughout essentially the second half of the year.
Corinne Blanchard: Thank you. And then just as a follow up, I’m going to keep with you, Gilberto, but in terms of cost expectation, because I think you have been doing pretty good in terms of cost control and percentage of volume. Can you try to give us a little bit of color what to expect for the last quarter and also into 2024?
Gilberto Antoniazzi: In terms of cost, you said?
Corinne Blanchard: Yes.
Gilberto Antoniazzi: Look from a cost perspective, actually we’ve been having some good news, as you probably see in the back slide we have. We actually have a favourable quarter over quarter on cost, again, driven by some of the royalties and some inputs that we purchased from third parties. And we expect to see the same in Q4. So again, we continue to see some, frankly, not expected, but very good cost improvements over the second half of this year. And looking to next year, again, for you a little early, we’re just in process of start planning for next year, but I think we will, some inputs that we buy, they are driven by carbonate prices in China, to be honest. So if price remain what it is, we’re going to have some improvement costs in our specialty business and I think we might have some benefits also for currency in some other countries. But again, it’s a little early to say that, to confirm that.
