Sunday 4 June 2017

Awakening: Tesla Model 3 And The Hot Summer 2017 For The Lithium Supply Chain.

Very slowly Lithium Industry is starting to get some attention from the investment crowd, but the real awakening is still ahead of us. This summer will be very hot for the lithium supply chain, and the first real test is coming. Tesla Gigafactory will start mass production of Tesla Model 3 batteries in July and 4 Lithium Megafactories are coming online in China.

Ganfeng Lithium has made a very interesting public disclosure in China about SQM "stopping a supply of Lithium Brine to Ganfeng in June". It is very difficult to judge the scope of this interruption in the lithium supply chain for Ganfeng at this moment, its reasons and when the situation will normalize, but the message is clear - the security of lithium supply is the critical issue for all the major players in this exponentially growing market. And the real test is still ahead of us, the auto industry is still talking about 5% - 10% - 15% of electric cars in total auto sales, but what will happen when all cars will be electric after 2025?


It looks like the change is affecting SQM's supply of concentrated brine to Ganfeng as raw material and changes in import and export policies in Chile demand to produce high value added products in the country. These products will cut the margins for converters - producers of lithium chemicals from raw materials like lithium brine. Argentina is coming to the front line of lithium brine projects developments now.

I expect this trend to be continued, lithium is taking its geopolitical place now and countries hosting these deposits will move up the value chain producing lithium chemicals, batteries and EVs finally. The recent visit of Tesla's officials to Argentina is showing the dramatic change in the attitude to the lithium supply. EVs and ESS producers will have to migrate to the countries with resources to feed Energy rEVolution. International Lithium's JV operations with Ganfeng attract a lot of interest as an entry point in the building of vertically integrated lithium business with one of the world's top lithium producers and we are examining these strategic opportunities.

The Switch And Lithium Race: China, India Plans For Electric Cars Threaten To Cut Gasoline Demand.

Now it is getting interesting. Reuters reports about the coming tide of electric cars and China raises the stakes again. Now China wants "at least" 20% of all auto sales or 7 million of New Energy Vehicles to be sold annually by 2025! And India is talking more and more seriously about only electric cars being sold by 2030. Read more.

Tesla Officials Visit Argentina’s Governor Of Salta For Solar And Storage Projects And Sourcing Lithium.

ElectTrek reports that "salt on the salad'": this is how Elon Musk has described lithium before - must be very important for Tesla's digestive system after all. I am writing here extensively about the coming control of the Lithium supply by Chinese companies who are very aggressively buying all the best lithium projects worldwide. It is very difficult to pretend anymore that any lithium will be coming from any signed by Tesla agreements with some junior miners in the nearest future. Lithium cathode is still produced by Panasonic for Tesla Gigafactory. Read more.


Roskill - Lithium Supply Reacts as Automotive Battery Growth Enters Ludicrous Mode

"LONDON, May 31, 2017 (PR Newswire Europe via COMTEX) -- LONDON, May 31, 2017 /PRNewswire/ -- 
The market for lithium-ion (Li-ion) batteries was 87GWh in 2016, a ten-fold increase from a decade earlier. Growth has been driven by an increase in the number of applications using them, as well as gains in market share versus other rechargeable battery types. From the 1990s through to the early 2010s, the market was predominantly in portable consumer electronics, with the transition from mobile phones to smartphones, and the introduction of tablets, increasing battery capacity per device despite lower unit sales growth as markets became saturated.More recently, growth has been accelerating as the automotive market has started to electrify its powertrains.Automotive uses absorbed almost 50% of Li-ion battery output in 2016, up from 27% in 2014 and 7% in 2012; a large jump in electric bus output in China in 2015 being the main driver. 
Transport to dictate Li-ion battery market through to 2026 
A strong government drive in many countries to increase penetration of hybrid, plug-in and full electric vehicles (xEVs) to meet emissions objectives is underpinning xEV development. Meanwhile falling battery costs, improved battery range and charging infrastructure build-out is reducing vehicle costs and boosting consumer interest. Tesla has made EVs the iPhone of the automotive world, if not driving the market by volume then certainly in appeal. Roskill expects the positive trend in xEV sales to increase and full electric vehicles to compete on price with current gasoline/diesel models in the early 2020s without incentives; the transportation market for Li-ion batteries in Roskill's baseline forecast could therefore reach over 1TWh in 2026, representing a 40%py increase from 2016. 
A similar rate of growth is forecast for energy storage systems (ESS). Emissions objectives again play a role, but so does the economics of electricity grid management where increased storage may reduce other costs relating to generation and to the network.For the consumer, storage offers the opportunity to reduce electricity costs and to benefit fully from self-generation.Roskill forecasts an ESS market for Li-ion batteries of 13GWh in 2025, up from 2GWh in 2016, but its growth trajectory could change more quickly as costs fall and renewable energy up-take rises.
Rapid developments in the lithium supply chain incentivised by price increases 
The increase in lithium prices from end-2015, combined with a growing realisation that vehicle electrification is finally happening en masse after several false starts, has caused a rush in companies staking, purchasing, evaluating or expanding lithium assets.An additional 370,000tpy LCE of lithium production capacity has been identified by Roskill as scheduled to come online at existing and new operations by 2020, although it is unlikely all of this capacity increase will be realised. Around 250,000tpy LCE of capacity (factoring utilisation rates and ramp-up) will be needed to satisfy battery market growth alone at current projections.That is double current capacity, and equivalent to two sizeable projects a year. Any hiccups will reverberate through the supply chain, and consumers are not currently doing enough to ensure their future supply chain is underpinned. 
Investment is therefore being led by major existing lithium producers such as SQM, Albemarle, Tianqi Lithium and Ganfeng, who have announced plans to increase output of lithium either through existing ore new assets or joint ventures.However, the diversity and availability of lithium supply is expected to, and will have to, improve further towards the 2020s as a number of new lithium projects are advanced. The shift to Tier 2 assets, with more complex resources, and the need to produce more hydroxide, has catalysed the emergence of new extraction technologies. Leading this charge is Nemaska Lithium in Canada using electrolysis of mineral-derived sulphate solution to produce hydroxide, while Enirgi, POSCO and Eramet in Argentina plan to use direct brine extraction methods to produce lithium carbonate. Lepidolite is seeing increased attention, after Chinese converters proved in 2016 you can make a viable business processing it in a high price environment, with companies such as Lepidico pursuing lepidolite conversion outside China. Meanwhile Rio Tinto is pursuing evaluation of jadarite mining in Serbia, a major resource but one that has not been tapped for its lithium before. Risks remain, as no new technology, whether mineral- or brine- based, has yet achieved large scale. 
Pricing to moderate on improved supply 
Increased output by SQM and Orocobre in South America, coupled with increased production from Talison in Australia and a rise in Chinese domestic output, moved the lithium market from a supply deficit in 2015 to marginal oversupply in 2016. The emergence of new mineral producers in Australia during 2016 has improved the availability of lithium feedstock to Chinese mineral converters previously reliant on Talison. Galaxy Resources and Neometals began shipments of lithium mineral concentrates to customers in China at end-2016, and Mineral Resources is now selling direct-shipped-ore (DSO). The improved diversity of mineral concentrate supply into China is expected to alleviate supply-side pressure and contribute to an easing in Chinese domestic lithium prices; although refined output will lag meaning a collapse in spot prices in China is unlikely. Contract prices ex-China are expected to peak in 2017, with the outlook thereafter dependent on demand growth levels and how quickly supply can react. A return to mid-single digit pricing is unlikely given the incentive needed to get projects to production. 
Roskill's lithium market report has forecasts out to 2026. It is essential reading for anyone needing a comprehensive overview of the lithium market. 
Lithium: Global Industry, Markets & Outlook to 2026, 14th Edition is now available from Roskill Information Services Ltd, 54 Russell Road, London SW19 1QL UK. Click here [ ] for further information or to download the report brochure."

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