China is manipulating lithium and cobalt prices, mining magnate says
Mining entrepreneur Tony Sage is backing Donald Trump when it comes to the US President’s plan to reduce China’s stranglehold on resources.
Mr Sage — who chairs ASX-listed companies including European Lithium, Fe Ltd, Cape Lambert and Cauldron Energy — believes China is manipulating the price of lithium and cobalt as it did with iron ore before the steel-making commodity hit record highs.
“If I can take you back to 2007 to 2011, the iron ore price went from $US20 a tonne to about $US100 and the Chinese panicked,” Mr Sage told Stockhead on the sidelines of the International Mining and Resources Conference in Melbourne in early November.
“They were the serious buyers. They played with the stock, they played with the spot prices and they held it down for at least one or two years because they were the biggest buyer.
“They’re doing exactly the same with cobalt and lithium.”
Mr Sage says the spot price is not reflective of what lithium and cobalt producers are actually selling their product for.
“If you look at the long-term prices, if I go now and sell my future production in cobalt I’ll get 30 per cent more than the spot price.
“It happened exactly this way between 2007 and 2011 with the iron ore price, and to a lesser extent the coal price, because the buyers of the material dictate the price.”
Right now about 85 per cent of the world’s lithium comes from China, but in the same way the Asian powerhouse currently dominates in rare earths, it wants to increase its control over lithium and other battery metals.
“They want to be the controllers of rare earths, cobalt and lithium because that’s the future — battery storage, EVs, your mobile phone, everything, and they’re manipulating the price,” Mr Sage said.
One city in China, Zhejiang, already 30 per cent of its taxis and 50 per cent of its buses are electric.
Mr Sage says that is just a test case and the whole country wants to be fully electric.
“If they replicate that around China, there will be no cobalt and lithium for the rest of the world,” he said.
China can’t keep prices down forever
Following four years of iron ore price manipulation, the Chinese could no longer keep the price down and in 2011 it hit a record high of over $US190 a tonne.
Most of the deals done between battery metals producers and buyers are private and the price is negotiated.
Mr Sage said if one of his companies, Cape Lambert Resources (ASX:CFE), were to do a deal for its cobalt it would be asking for more than the spot price.
“We won’t be asking for $US65,000 a tonne, we’ll be asking for $US75,000 or $US80,000 for a long-term sale,” he said.
“You talk to all the buyers and sellers, it is being manipulated by the Chinese and that’s why I’m a pro-Trump guy on trade because they do these sorts of things in virtually in every mineral and they want to corner the market.”
Mr Sage is also chairman of European Lithium (ASX:EUR), which owns the Wolfsberg lithium project in Austria.
Europe has declared lithium and cobalt “critical minerals” and is aggressively pushing to be a bigger supplier.
“Once our [definitive feasibility study] is done we will get significant help from the EU to build the plant there,” Mr Sage said.
“They want three or four hydroxide plants all over Europe so 30 or 40 per cent of the world’s supply can come from a different spot.”