Tuesday 30 June 2015

Joe Lowry: The Opaque World of Lithium.


  Joe Lowry provides us with another great insight into the secretive world of lithium producers,  suppliers and buyers. Former lithium oligopoly is under the threat  and this landscape is changing forever now. Joe Lowry is the source to follow on his LinkedIn page and Twitter  @globallithiumYou can find more information on my links below as well and the situation with SQM proves him right one more time about the risks to the tight lithium supply chain even before Tesla Gigafactory is coming on-line.

Peter Epstein: Interview Of “Mr. Lithium,” Joe Lowry Of Global Lithium LLC.


  Peter Epstein presents to us the very interesting view from the independent insider into the very closed and tightly held lithium market. Tesla is making headlines and situation with SQM provides another evidence of the importance of secure lithium supply for the major players. Joe Lowry is raising alarm about the coming shortage in the lithium supply even before Tesla's Gigafactory will be coming on-line and I have been talking about it before, you can continue your research on the links below. Now we have another catalyst for the lithium industry in the making. Access to the capital is the most important for the junior miners working on building lithium supply chain. Ganfeng Lithium - one of the new top lithium producers from China is financing the development of J/V projects with International Lithium in Ireland and Argentina.

Chile, Lithium And SQM: What To Expect From The Chilean Lithium Industry?

  What is really happening with SQM and lithium production in Chile now? Is it really the perfect storm and the very tight battery grade lithium supply will be under further strain from political battle around Atacama? Daniella Desormeux from signumBOX will be one of the best sources to explore the ongoing situation.

Security Of Lithium Supply: SQM Stock Still Down On News Chile Wants To Revoke Mining Leases.

  Here comes the perfect storm for the lithium supply chain. Politics, bribes and fight around the "hot assets" in Atacama are not the best ingredients for the hungry Chinese companies ramping up battery grade lithium supply for the coming Megafactories all over the world. Meanwhile Tesla Gigafactory is still relying on Panasonic to sort out all lithium supply issues. Price of battery grade lithium was going up even before these political games around SQM and now rain storms will add to the strains on production in Atacama. Now you can better appreciate why Chinese giant Ganfeng Lithium is financing and developing with International Lithium our J/V projects - security of Lithium supply is taking the central stage for the ongoing electric rEVolution.

Elon Musk's Gigafactory Battery Plan Spurs Lithium Producers To Weigh New Plants.


  News about the potential shortage in battery grade lithium supply is travelling fast and now hitting the mainstream media.

Tesla Gigafactories: Is There Enough Lithium to Maintain the Growth of the Lithium-Ion Battery Market?

Joe Lowry: Lithium Capacity Additions Will Be Short Of Demand.

"Joe Lowry is sounding the rising alert for all industry insiders about the coming shortage of lithium. Tesla is waiting for Panasonic to solve all the supply problems, but the growing demand is already pushing prices higher even before Gigafactory comes on-line! The ignition of mass market for electric cars and energy storage will come with lower lithium battery cost. Gigafactory promise us to bring the magic $100 per kWh. Supply of lithium will become crucial and its security will be even more important than its price.
  Our partner Ganfeng Lithium controls with other Chinese companies 75% capacity of battery grade lithium hydroxide now. We are moving into the new landscape for critical materials which are powering the green revolution. Stay tuned for the update from our lithium exploration programs on J/V projects in Ireland and Argentina."

Joe Lowry: What The Beginning Of Lithium Shortage Looks Like.  

  "Joe Lowry from @globallithium presents another evidence of growing constrains in the lithium supply chain. He knows International Lithium strategic partner Ganfeng Lithium very well and has covered its incredible growth in his previous articles, which you can find on this blog as well. Read more."

International Lithium Corp. Updates on Drilling Programs in Argentina and Ireland.

  We have great news today from our both J/V projects with Ganfeng Lithium! You already know about my personal vision for the lithium industry and our strategic partnership between International Lithium and Ganfeng Lithium from China. Now we have results coming in from our exploration and development programs.

Joe Lowry:

The Opaque World of Lithium

"Interest in the lithium market continues to grow with the emerging Tesla story, growth of the ESS market and ubiquity of personal electronic devices driven by the power of the lithium ion.
Despite the fact that the vast majority of people living on the planet have a device utilizing a lithium battery; as a global market lithium is tiny when measured by any financial standard. Unlike other metals used in the production of lithium ion batteries such as nickel, cobalt and aluminum - lithium is not traded on the London Metals Exchange (LME) - the global trading and price formation venue for industrial metals. Lithium users have no systematic way to hedge or pay for price protection when they budget or plan production. Unlike the major metals, due to the small size of the global lithium market - pricing of lithium carbonate and lithium hydroxide does not have the transparency that other metals have. 
The lithium market has a limited number of producers and most of them have an interdependent relationship with one or more competitors which creates additional concern about the "lithium club" in the minds of customers . For example: FMC sources carbonate from competitors, Albemarle has a spodumene JV with Tianqi and sources metal from competitors, SQM supplies lithium chloride brine to Ganfeng Lithium who supplies metal to members of the former “Big 3”, etc, etc. There is nothing particularly unusual about this aspect of the lithium market and certainly nothing sinister but it does create the feeling within the lithium customer base that the lithium industry is more collegial than other industries and has a higher rate of information flow between competitors than they would like to see.
During my years working as a marketing and sales executive for a major lithium producer, I heard complaints from large purchasers of lithium from Tokyo to Brussels to New York about the "clubby" and "secretive"  world of lithium suppliers. 
The facts do not support concerns about lithium suppliers working "hand in glove" on price. The average price of lithium carbonate in 2014 was lower than the average price in 2007 despite a steady growth in demand.  If the lithium suppliers are "working together" to manage price they clearly aren't very good at it. Like most products, supply and demand governs prices.  Until late last year lithium carbonate supply comfortably exceeded demand. Due to delayed expansions and project start-ups scheduled for 2014, demand is exceeding supply at least in the short term and prices are currently moving up. 
Despite the fact that the lithium industry is less open and transparent than other industries, it is hard to make the case that consumers have suffered in any way.
From my perspective many of the large lithium consumers have had unreasonable expectations when confronted with the need to source a critical raw material without an LME or other mechanism with which to justify the prices they paid to their management. Trying to bully lithium suppliers doesn't work very well.
When Nissan discovered the company I worked for had virtually 100% share of the lithium raw material  to their supply chain for the Nissan Leaf battery they summoned me to their offices to demand I guarantee fixed prices for several years during a time when prices for lithium hydroxide were increasing quarterly. The justification they gave for their request was: "Nissan management has ordered it". Really? 
The auto industry is legendary for bullying suppliers. I was a little shocked at such an unreasonable demand and replied that Nissan should be concerned about supply rather than price especially since no other lithium supplier was fully qualified to supply them at that time. I kept a straight face as several salarymen across the table tried to apply pressure by invoking the name of their company like a "buddhist chant". I pointed out that lithium raw materials are actually a very minor portion of the cost of a battery pack and that the cost of a Leaf battery would not change substantially if I doubled the price or gave them the lithium for free. Frustrated at my noncompliance with their request, the leader of the purchasing team, in a very non Japanese fashion, slammed his notebook shut, walked out of the room and went to the Starbucks conveniently located across from the meeting room. True story.

                     Lithium consumers often feel outmatched by suppliers
As for the "lithium club" concerns, it is logical for lithium producers to act in their own best interest by making deals with other producers to avoid capital expenditures or leverage a strong cost position in one product line via a trade or swap with another producer to improve their bottom line.
There is no compelling reason for the lithium producers to be more forthcoming with details of their business beyond the legal reporting requirements for public companies. Of course, from time to time lithium producers have benefited from the lack of  market transparency or reliable global price information. There have been occasions in the past where prices have varied by more than 30% for the same product being sold under similar conditions. In these cases, inefficient markets are the issue.  
Reviewing annual reports and 10Ks of the lithium producers does provide a limited amount of detail but will generally create more questions that can’t be answered without supplemental data that is not readily available.
Anyone seeking to learn more about the industry has a significant challenge. Companies like Roskill that regularly publish info about a wide range of products really don’t know the lithium business in the kind of details lithium consumers and potential investors want and need – the lithium market is too small to invest the resources to have in-depth knowledge yet their often outdated information is often used as a reference because they are a recognized name. A new company called Benchmark Minerals shows the most potential for providing current and accurate information about lithium and a few other related industries. Signum Box is also a credible source for information on supply and demand on a pay as you go basis.
Unfortunately, lithium consumers seeking information about pricing continue to have limited options. Even the details provided in the export statistics of producing countries and the import statistics of major consuming countries can leave the uninitiated scratching their heads due to the amount of transfer pricing included from major players, lack of clarity whether pricing is FOB or CIF, currency translation issues, etc. etc. General trends are fairly easy to spot but without a certain depth of industry knowledge drawing conclusions from an import/export data dump is risky business.
Unlike larger industries there is no lithium trade association or clearing house for lithium information. There are several dozen lithium ion battery shows around the world each year but the focus is not on the lithium market itself. Those interested in the details of the lithium market can always contact an “expert service” like GLG, Guidepoint or Coleman and hope the “expert” they are put in touch with can shine some light in the lithium darkness. There is one annual event focused on lithium but it seems to have declined in value over time.
Last week the 7th Annual Industrial Minerals Lithium Supply and Markets Conference was held in Shanghai. The first conference held in Santiago, Chile attracted the leadership of the major lithium producers who were both speakers and active participants. Over the past few years participation by the major lithium companies has declined. The event has become more of a platform where hopeful “Juniors” to try to attract attention to projects that seem perpetually lacking the funds to move forward. Despite all the buzz in the industry created by Tesla and others planning major lithium battery investments, in general the “Big 3” leadership tends to avoid the annual gathering. Again – what is in it for them?
Those seeking more insight into the lithium industry can only hope that the growing interest in the lithium market and the emergence of Benchmark Minerals, Signum Box and others that are more narrowly focused than large market information firms who simply repeat what lithium producers say without critical thinking and real analysis will help provide more accurate and current information."

No comments:

Post a Comment