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VANCOUVER (miningweekly.com) – ‘Big money’ investors are increasingly looking to invest in the relatively small ‘new-age metals’ space, comprising metals such as lithium, graphite and cobalt, as strengthening fundamentals for these minerals and an unprecedented high-impact investment opportunity draw the potential for bonanza profits.
As Lithium Americas CTO Dr David Deak puts it: “We are here for the imminent energy revolution mirroring the industrial revolution of about two centuries ago.”
He was one of the line-up of speakers at London-based Benchmark Mineral Intelligence’s Vancouver leg of its World Tour 2017 series of seminars on Friday, in which Mining Weekly Online participated.
“We are at the convergence of three multi-trillion-dollar industries, comprising the auto, tech and energy spaces. The main drivers are electric vehicles (EVs) with grid storage solutions being another major driver coming down the road,” Benchmark Mineral Intelligence MD Simon Moores told the audience.
Pure EVs are expected to push demand for energy metals significantly higher, with Tesla Motors, Nissan and Chevrolet’s latest EV models being the main impetus, each equipped with large lithium-ion-based batteries in the 60 kWh to 65 kWh range.
“The era of the semi-mass market EV has started,” Moores declared.
According to Deak, the lithium-ion battery industry has reached “the point of no return”, with the market having reached cost parity between EVs and internal combustion-driven vehicles.
New York-based House Mountain Partners founder and co-author of The Disruptive Discoveries Journal Chris Berry likened Tesla’s 2014 announcement of its first ‘gigafactory’ as the ‘Big Bang’ for the industry.
“What a difference three years makes. While there were in 2014 only 16 lithium and development projects in 2014 and 156 currently in 2017. This has driven down the battery cost per kilowatt hour by 60% in three years, while EV sales more than doubled in the same time frame,” he said.
So far this year, the industry has raised about $500-million for lithium investment, and Berry believes investors will match the $1-billion raised in 2010 to 2012 “soon”.
EV BOOM
Moores pointed out that the EV industry is gaining critical mass, with the outlook for lithium-ion battery demand by 2025 outstripping current supply. While projections for how much battery manufacturing capacity will be required by then vary between about 300 GWh to nearly 550 GWh, Benchmark places the figure at just over 400 GWh of battery demand.
That is almost a 700% increase over 2016’s estimated battery market size of about 70 GWh, Moores says.
This, in turn, will drive lithium demand by 2025 to between 250 000 t and 425 000 t, up from 2016’s estimated demand of about 80 000 t.
Demand for batteries will also impact graphite, lifting demand to a range of between 350 000 t and 580 000 t, according to various analysts, with Benchmark’s forecast at 450 000 t. In 2016, demand was about 100 000 t.
Similarly, the cobalt market is expected to rise from about 45 000 t in 2016, to between 80 000 t and 170 000 t by 2025 – up nearly 300%.
Moores enthusiastically noted that these projections are underpinned by the dramatic rise of the lithium-ion megafactories, with about 186 GWh of battery-manufacturing capacity either in production or under construction, and counting. The capacity increases are led by Chinese battery maker Contemporary Amperex Technology (50 GWh by 2020) and Tesla Motors (35 GWh), while BYD China, Lishen and LG Chem are aiming at increasing output to about 20 GWh each.
“While Tesla is still important because of its business strategy and vertical integration, the new lithium-ion industry is a ‘China story’,” Moores states. Elsewhere in Asia, new plants are still being constructed in Japan and Korea, but China’s capacity ramp-up outstrips the rest of the world's production. Europe is lagging, with only a small percentage of the global battery market.
LITHIUM FUNDAMENTALS
There is not enough lithium currently being produced to meet demand, which has seen lithium carbonate prices rising from about $4 500/t in 2015, to $12 313/t in March this year, according to Benchmark’s information. Similarly, the more niche lithium hydroxide product has seen prices jump from about $6 500/t in 2015, to $17 000/t in March, with Moores saying spot prices are currently trading higher than $20 000/t in China.
Lithium carbonate is used to manufacture most lithium-ion battery cathodes, which are made of lithium cobalt oxide. Lithium hydroxide is also used by manufacturers, but they are competing with the industrial lubricant industry for the same raw material, tightening the supply situation when compared with its carbonate counterpart. Lithium hydroxide has the benefit of better power density (more battery capacity), longer life cycles and enhanced safety features.
Moores pointed out that lithium price growth had only once in the last decade turned negative. In 2010, the price dropped about 30%. In 2016 alone, the price jumped about 85%, with the forecast for 2017 at about 25%. “No other mineral has the same price profile,” Moores stated.
Lithium’s impact on end markets has increased drastically since 2006, when it accounted for about 22% of the battery market. This rose to 42% in 2016 and is forecast to expand to 67% by 2020.
Moores says prices continue to rise and are stabilising at the high end. The price outlook for lithium carbonate between 2017 and 2020 is about $13 000/t and lithium hydroxide is expected to average about $18 000/t.
According to Moores, there will be no oversupply situation for lithium, despite supply growth estimated at about 12% to 15% a year, and no resultant price crash.
He expects spodumene-based lithium production to fill the supply gap between 2017 and 2018, with new brine-based sources expected to come on line from 2020 and beyond. Meanwhile, the big lithium producers such as Albermale, Tianqi and Ganfeng are jostling for market share and pursuing aggressive mergers and acquisitions.
According to Deak, lithium is fortunately plentiful, and it is just a matter of mining it economically, in the most environment-friendly way. He believes there is enough lithium to electrify every vehicle in the world today, but this will require about 62-million tonnes of the battery-making ingredient. “It certainly is doable, but we will need to move away from ‘incremental’ lithium supply growth and think more in terms of the ‘gigafactory quantum’,” he said.
Once the world’s vehicle fleet has been electrified, demand for lithium is expected to fall, as recycling of batteries will bolster supplies. This, he said, could start happening as soon as 2040 onwards.