Kirill Klip: Energy rEVolution: How Lithium Cells Are Made For Electric Cars And Solar Energy Storage.

Sunday, 12 June 2016

Energy rEVolution: How Lithium Cells Are Made For Electric Cars And Solar Energy Storage.

Model 3 Owners Club has produced a very good educational video about the lithium technology and how lithium cells are actually made. Jeff Dahn of Dalhousie University has joined now Tesla as its Battery In Chief. Lithium makes below 3% of the total cost of the lithium battery as finished product and Elon Musk has called it: "It's like the salt on the salad", but you just can't cook any lithium battery without it. You can find more information on lithium market below.

Lithium 2.0 Launch: Security Of Supply - Galaxy Resources To Buy General Mining In Lithium Takeover.

This chart of lithium price in China is keeping awake at night very many people now in our very small industry. Quite a lot of them have totally missed the launch of Lithium 2.0 and now security of supply is the major geopolitical issue. Tesla is still relying on Panasonic to supply lithium cells and a lot of people are relying on the "Lithium Found in Nevada" under Tesla's Gigafactory floor.

Ganfeng Lithium: $4.5 billion giant from China is the strategic partner of International Lithium and now financing two of our J/V operations in Ireland and in Argentina. We are going where Lithium is and not just the hype around it. As we have discussed before, Lithium 2.0 is now for real as we have the real electric cars finally on the road and GM Bolt and Tesla Model 3 bring us mass market for electric cars. Cheap lithium batteries change everything. Exponential growth in EVs sales is following by deployment of Energy Storage now.

This Lithium M&A is pointing out another very important quality of Lithium 2.0 Launch: separation of dreams from the real people with the real projects, capital and technology to put them forward. There are only very limited number of quality lithium projects and even less capable teams with access to the capital and technology, like in the case of International Lithium and Ganfeng.

Galaxy is back from after the death experience and moves into the "New Lithium Top Six" taking over the "Old Lithium Big Three". Albemarly, SQM and FMC are being chased by very aggressive Ganfeng Lithium and Tianqi from China. Now we can add Galaxy to this very small space for investors to play around with security of lithium supply for the future when all cars will be electric. That chart of lithium price shows what is happening when in the last 5 years out of 80k T of LCE expected new production annually only 18k T was put on-line and when Gigafactory and Megafactories are only coming on.

Now is time to check out the Gigafactories Game of Lithium Demand:

Before we were talking about:

1. Tesla Gigafactory 1 with 35 GWh and cost $5bn in Nevada, US.

2. LG Chem with 7 GWh and cost $0.5bn in China.

3. FOXCONN with 15 GWh and cost $0.81bn in China.

4. BYD with 20 GWh in China - Warrenn Buffett owns a stake in BYD, leader of EV sales in China.

5. Boston Power 10 Gwh in China - Ganfeng Lithium ILC partner owned 10% of Boston Power.

Total: 87 GWh - point of reference: total world lithium batteries production in 2013 was 35 GWh.

Now we have to add here:

- 17 lithium battery start ups in China, totally unquantifiable number and I will leave it out as speculative.

6. BYD plants in Brazil and Argentina.

7. Panasonic in China.

8. LG Chem in Europe.

9. Mercedes in Europe.

10. A123 in Europe.

11. BMZ with 30 GWh planed capacity in Germany, Europe.

12. Volkswagen with $11.2 cost planed in Germany, Europe.

Total: more than 117 GWh of new lithium batteries capacity.

Now you can appreciate that my scenario of lithium demand doubling within next 5 years as the conservative one. Only Tesla with its plan of 1 million EVs produced by 2020 will consume at least 60 GWh of lithium batteries capacity assuming the average of 60 KWH batteries per EV. Knowing the Elon Musk's maniacal insistence on producing the most of all components in-house, we can add Gigafactory 2 in Europe as well to the list above.

Where all this lithium will come from? This is the very good question to ask the best experts at coming Benchmark Minerals Intelligence Lithium Batteries Supply Tour 2016, which will start in London on June 6th at UBS. I will give you a teaser and few links on this blog to dig out your own conclusion. Albemarle is the top lithium producer now. SQM is struggling with political issues, FMC is struggling with lithium production and both are producing Lithium for less than 20% of revenue. It means that even if you can technically produce more, you have to sell 80% more of other products as fertilisers as well. Ganfeng and Tianqi are taking the market by the storm and both are in fierce competition. Now Tianqi controls Talison with Abemarle (Abemarle has acquired Rockwood Lithium) and Ganfeng is buying lithium spodumene from Talison and lithium brine concentrate from SQM. It is not very well constructed base for the exponential growth and at AGM on 21st of September 2015 Ganfeng Lithium has officially informed its shareholders: "its major risk is the security of lithium supply." Ganfeng has invested in Neometals and approved budgets for International Lithium J/V projects in Ireland and Argentina. Ganfeng owns 15% stake in International Lithium. The presentations below will provide you with more initial information for your due diligence. Read more."