Sunday, 3 January 2016

Joe Lowry: What Is The Price Of Lithium In 2016?

Global Lithium.

  Joe Lowry is providing us with another glimpse into the "Opaque Lithium Kingdom". Pricing of Lithium Carbonate remains at the mercy of direct seller-buyer relationship and is not fixed like gold or copper on the spot market. And it is now Seller's market. Ganfeng Lithium has increased its prices twice in October to the all-time-record of $11,049/MT. My personal take will be that LCE prices in China can reach $15,000/MT as new supply is very limited and Tesla Gigafactory will be coming on-line in 2017 creating panic to secure lithium supply from other Megafactories following after Tesla from BYD, Foxconn, LG Chem, Samsung SDI, Boston Power, A123 and numerous start ups (as many as 17 according to my understanding) in China. The value of Lithium materials in the lithium battery is less than 3% of its total cost, the security of lithium supply becomes everything, when availability of supply is more important than its price.

International Lithium And Ganfeng Lithium Move Mariana Lithium Brine Project Forward In Argentina.

Mr. Kirill Klip, President, International Lithium Corp. comments, “We have always viewed Argentina as a favorable location for mineral exploration and development and have been able to operate in a mutually beneficial manner with the local people and governments. The results of the recent elections have managed to give foreign corporations greater confidence in the future of business and mineral resource development in Argentina. We welcome the change and look forward to working with the newly elected officials and advancing our Mariana lithium brine project in cooperation with our strategic partner, Ganfeng Lithium. Security of lithium supply is becoming more important as witnessed by recent price increases in China, all in advance of the completion of new battery production facilities announced by Tesla and other manufacturers. We continue to build a vertically integrated lithium business with Ganfeng Lithium to meet the future demand of lithium products that will address the increasing demands for lithium raw materials and chemical products.” Read more.

International Lithium Receives Notice of License Renewals for the Avalonia Lithium Project, Ireland

"Mr. Kirill Klip, President, International Lithium Corp. comments, “The Avalonia project joint venture, fully funded by strategic partner Ganfeng Lithium Co. Ltd., (“GFL”), could be of strategic importance to the European Union should a sufficient resource be identified. Clean fuel technologies for motor vehicles are becoming increasingly important to the European Economic Community to tackle climate change and the air pollution crisis in major urban areas. Lithium technology will play a major role when it comes to providing batteries for communication devices, electric vehicles and utility storage systems. Renewable sources of energy such as solar and wind power will also benefit from lithium battery technologies and become more commonplace as the problem of intermittency will be addressed providing steady power from these sources 24/7.” 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. Read More."

Joe Lowry:

What is the Price of Lithium in 2016?

January 1, 2016
Interest in the lithium market grows with each passing day. Increased demand for lithium ion batteries that power smartphones, e-transportation options (cars, buses, bikes, etc) and ESS has created substantial attention from investors. The current soft market for traditional commodities (oil, steel, etc) has also drawn the interest of many analysts looking for a product with an upward trajectory to comment on.
A renewed high profile of the lightest metal combined with a growing supply shortage - especially in China (the world's largest lithium market) has created a very dynamic pricing environment that will likely last until the end of the decade due to the length of time it takes to bring new brine projects to market. 
The failure of Albemarle/Rockwood to bring their carbonate expansion in Chile on-line as scheduled and Orocobre's seeemingly endless "start-up" has left supply growth to a small band of Chinese spodumene converters who have built substantial excess capacity that requires a supply of feedtock which is currently dominated by the Talison JV controlled by Sichuan Tianqi and Albemarle who can collectively be referred to as the "evil empire" if you are trying to source spodumene.
If you need a primer on the spodumene situation please read my recent posts on the topic but suffice it to say the Talison JV's strategy is to manipulate the raw material supply situation.  This unhappy circumstance will last until other spodumene suppliers from Australia enter the market and help change the balance of power. Tianqi and Albemarle's recent behavior (shorting supply of Talison material to converters as well as raising the spodumene price) has driven up the lithium carbonate price in China substantially.
Lithium is a very opaque market making accurate pricing data is hard to come by. The lack of an LME type pricing mechanism has frustrated lithium purchasers for years. So, what is the current price for the most frequently purchased lithium product - lithium carbonate? My very clear response to that often asked question is: "Well, that depends......".
What I can tell you is that there is currently a "wild west" pricing environment in China with prices spiking into the teens in USD terms but the price paid in a few spot transaction is not "the price" of lithium carbonate - even in China. I can also tell you that members of the "Big 3" have signed a few full year 2016 contracts in the low $6,000 range; however, most customers around the world will pay substantially more than $6,000/MT for lithium carbonate this year. China will have the highest prices but the rest of the key markets will tend to converge to a narrow price band. The big loser is Korea who used to have a deep discount when compared to their competitors in Japan and China. It seems SQM and Albemarle/Rockwood finally figured out that in a shortage situation there was no longer a need to cave in to LG, Samsung and Umicore's tough talk. 
The fact is there is no clear cut "price" for lithium carbonate or lithium hydroxide as we enter 2016. 
In the quarter century I have been active in the lithium business I have never seen a bigger spread between high and low prices in this market. The high prices in the China spot market being more than double some contract prices elsewhere in the world. This would seem to be a market ripe for arbitrage but that opportunity is limited in such a small arena.
As you read analyst reports and other "credible" sources - be suspicious of anyone starting a sentence in 2016 with "the current price for battery grade carbonate is...". Much of the pricing that was previously done on an annual basis will gravitate to six month or quarterly pricing which will trend upward until new spodumene and brine capacity comes online.
Regarding hydroxide - the price for hydroxide in China is generally lower than carbonate given the unique situation in that market. Elsewhere I have personal knowledge and in some cases participation in pricing ranging from the low $8,000s/MT to over $12,000/MT. 
I have a global average price projection for both carbonate and hydroxide in 2016 but that is not something I publish on Linked In. A person has to make a living.
Happy New Year - time to watch some football."

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