Thursday, 14 January 2016

My Outrages Lithium Price Prediction Of $15k per MT Of LCE And Joe Lowry On China Lithium Market Upheaval.


Copyright Global Lithium LLC, used with permission.


  Joe Lowry makes very interesting observations about the dynamic in our Lithium Universe. China is the largest Lithium Market in the world now. Security of Lithium Supply becomes the most important element of your business plan, when market is growing exponentially. It is all happening even before Tesla Gigafactory is coming online with other Lithium Megafactories to follow. My prediction about $15k MT LCE prices in China now suddenly does not look totally outrages any more!



"Asia is taking the very important lead in this space as well. China is not only leapfrogging directly into the Lithium Energy Space with Electric Cars and Solar, but building the advanced materials base for this new Energy rEVolution. Panasonic, Nissan, Toyota, NEC, Sony, Samsung, Huyndai, LG Chem and others are staking its own place in electric cars now. China is the largest Lithium Market in the world already, moving to claim the largest Lithium Battery Producer title and Electric Cars in China will become the largest World's EV market early in the next year.
  Listen to that podcast, read the article about LG Chem and do your own research. Numerous companies are building Lithium Batteries facilities now in China: LG Chem, BYD, Boston Power (Ganfeng Lithium has 10% stake), Foxconn, Samsung, A123 - which will exceed even Tesla Gigafactory production capacity! 17 start ups only this year are trying to capitalise in lithium batteries market on the "War on Pollution" announced by China and state-level plan to build new strategic industry - Electric Cars. Read more."


International Lithium and Ganfeng: Chinese Lithium Prices Jumped Twice In October To $11,049/tonne.

  


  Now we can discuss the real situation in the lithium market and how the full blown shortage situation of Lithium looks like. China is rising and has become the centre of "Lithium Universe". International Lithium strategic partner Ganfeng Lithium put up its prices for a second time in the space of month last week to $11,049/tonne! With rising Lithium prices Ganfeng Lithium market cap is rising as well, now this giant from China has reached 2.3 Billion market cap. Industrial Minerals calls Ganfeng leading Chinese carbonate supplier and you can see the chart below reflecting the market situation in China. It will come as a shock for many: 


"Chinese lithium producer Jiangxi Ganfeng Lithium Co. Ltd increased the price of its lithium carbonate last week, marking the second rise in a single month.

The company raised the sale value of its material by nearly 17%, from Chinese renminbi (Rmb) 60,000/tonne ($9,470/tonne*) to Rmb 70,000/tonne ($11,049/tonne) - Industrial Minerals"

   Ganfeng has announced in China on its website establishing of $170 million credit line  to finance expansion of its production facilities, financing of acquired last year mobile lithium battery maker and investing in the development of raw material base. The security of supply is everything. International Lithium is building vertically integrated lithium business with Ganfeng.




International Lithium: Mavis Lake Lithium And Tantalum Project, Canada.



  


  "With GM Bolt and Faraday Future unveiling at CES 2016, Lithium Technology is in the headlines these days and getting finally on the investor's radar screens. Today I would like to present International Lithium's  Mavis Lake Lithium and Tantalum project in Canada. Our J/V projects with Ganfeng Lithium: Avalonia in Ireland and Mariana in Argentina are better known: we are advancing another $4 million exploration programs on these projects now. Mavis Lake presents another very important opportunity for development of potential source of conflict free strategic commodities in politically stable Canada. We are talking here about the security of Lithium Supply for the West now. With our J/Vs with Ganfeng Lithium solidly on track for the development, we are concentrating now on the Strategic Partnership to build the Next Lithium Producer in North America. Read more."






Joe Lowry:

The "Evil Empire" Marches On ...


Over the past few days I have had several interactions with trusted sources in China who are either purchasers of lithium products, converters or analysts who know the market well. The result is the summary slide below that illustrates what happens when a Joint Venture with a near term monopoly decides to start playing "hard ball".
At least for now China market pricing (notice I no longer am saying "spot pricing") is totally disconnected from the global market price. I don't know how long this situation will last but it could be long enough to cause serious problems in lithium ion battery supply chains as companies take time to adjust. A doubling of lithium price will not "kill the market" but it will cause more than one supply chain manager to  behave "like a deer in the headlights". 
My feeling that prices would rise significantly  have been public for quite a long time. Did I expect to hear of large consumers in China being offered prices the equivalent of $20/kg? No, I didn't.
For now, major markets outside of China are getting used to paying 15-20% more than last year while their counterparts in the Middle Kingdom are looking at 2X pricing. I expect the "Big 3" will honor their price commitments but woe to those who are not under contract or who signed only a quarterly deal. Any incremental material will be priced much higher or likely be shipped to China.
It is going to be an interesting year but you won't be hearing much more from me on Linked In in 2016. Hopefully I have provided a better understanding of the opaque world that is lithium but for now it seems to make more sense for me to go quiet for awhile. You are more likely to see my limited public thoughts on Twitter: @globallithium.
If you invest - do your own research. High prices in China do not make every lithium junior a good investment ...