This seemed the appropriate thread to place the research I've been doing about batteries and use of lithium over the next few years.
Warning long post!!
Short version, it looks like there will be an over supply of lithium chemicals and spodumene concentrate for a few years as the growth rate of supply has greatly exceeded the growth rate of demand.
Long version with links..........Trying to find what battery factories are coming online and when is a difficult task as there are different reports for the same factory all over the place, plus the amount of production, or predicted production change according to who wrote the article. For example the one CATL factory being built in Germany is reported in some places as being 14 Gwh while in others counts as a 100 Gwh factory as that is the ultimate goal, but never is funding to get to 100 Gwh mentioned, while the cost of the initial 14 Gwh is high ...........
Each of the following showing the approximate cost of these battery factories (Townsville in $A), is around that $US100m-$US120m per Gwh.........
That Svolt plant that will cost over $US2B will start small........."As part of that, SVOLT aims to seek about 1 billion yuan ($145.34 million) in its next fundraising round this year. It will raise more funds to support construction which begins in the second half of next year, with production starting in 2022."
"Production capacity will be around 24 GWh by 2025, senior SVOLT official Cao Fubiao said in the interview." https://www.reuters.com/article/gre...-build-20-gwh-factory-in-europe-idUSL4N24A0M3
In other words we read about these large factories being started and built, but it will take years AND the companies need to raise a lot of funds along the way, which often leads to delays or worse ............"When the German engineering giant Bosch was considering building a battery plant a couple years back, it estimated a cost of €20 billion. Bosch dropped those plans last year, saying the size of the investment made the plan too risky." https://fortune.com/2019/04/07/germany-electric-car-battery-production/
Basically there is a lot of news around about the huge growth in the number of battery factories being built, but the reality is a lot less than the 'overly' bullish scenarios some point to. It is best to go with the numbers from the experts that are around the same for 2025 of around 1,000,000 tonne of LCE required.
The Albemarle growth rate I used in the numbers for this post last week of 21%/a from the current 2019 expected use of 315kt of LCE alo comes to just on 1 Million tonnes LCE in 2025 ............ https://hotcopper.com.au/posts/39407059/single
The most interesting graph of this increase comes from the recent PFS of EMH on page 20 which shows the detailed graph from Benchmark Minerals from now to 2030, and shows around 1 Million tonnes of LCE use in 2025.
Titled "Lithium Growth Trajectory"... https://www.asx.com.au/asxpdf/20190617/pdf/445wmx53shljpt.pdf
This graph is very important as it first shows the obvious shortage of lithium past 2025, but it also highlights the oversupply in 2019-23. While we might be 'long term' investors in lithium companies, there is obviously current and iMHO ongoing pain for lithium producers over the next couple of years at least.
The production numbers I posted last week from the WA producers was a conservative number and despite some people claiming it is ''all'' lithium not battery grade, a quick visit to all the web sites of those companies quickly shows they are claiming battery grade concentrate, with most also being (or trying to be) associated with some downstream converter/conversion.
Just quickly those numbers again....
Greenbushes ............ 1,340,000t
MIN. Wodgina ...........750,000t
Mt Marion .............. 450,000t
Pilbara Minerals.........330,000t
A40 .............................160,000t
Galaxy .........................200,000t
Altura ...........................220,000t
That total add to 3,450,000t of 6% spodumene, it takes about 8 tonnes of 6% spod concentrate to make 1 tonne of LCE. The above numbers adding to 431,250 tonnes of LCE.
All will be capable of full production of those numbers before end of 2020, with the 2 largest commissioning/ramping up right now!!
For Brine.......
"In 2018, global production of lithium compounds from hard rock increased to 173,000 tpy of LCE from 60,000 tpy of LCE in 2016, while lithium compounds produced from brine totalled 148,400 tpy of LCE in 2018 from 140,000 tpy of LCE in 2017, according to Fastmarkets research team." https://do not advertise external s...g-at-accelerating-pace-on-growing-demand.html
Adding the South American (and Chinese) Brine production of ~150,000t (2018)of LCE (not all battery grade ala ORE's product), total LCE available at the rate of around 581,250 tonnes of LCE in 2020 compared to consumption/demand of 381,000t of LCE.
No-one else is forecasting anything like the production we already have built here in Australia!! When I add the brine number, without any growth from there (even though it is clearly happening) the supply situation is way in advance of demand figures.
Even if we knock back EVERY WA producer to 80% of capacity, then the total production is still 345,000t of LCE then add Brines of 150,000 = 495,000 t of LCE production rate in 2020, compared to demand of around 380,000t (using the 21% growth rate for lithium demand).
Then when we go forward and look at future development of lithium supply, PLS stage 2, then KDR, then Greenbushes further expansion (all due for completion in 2020-2021) plus the other planned expansions, PLS stage 3, Altura stage 2 etc, the production for 2021-23 is also well in excess of demand, even before allowing for expansion in brines as per SQM quarterly report ............. http://s1.q4cdn.com/793210788/files/doc_news/2019/May/PR_1Q19ConferenceCall_23may2019_ing.pdf
"We continued with our plans to increase our lithium carbonate capacity in Chile"
"We currently have a capacity of 70,000 tonnes"
"We are currently working on our lithium carbonate expansion to produce 120,000 tonnes per year. We believe this expansion will be completed during the second half of 2021"
In all the numbers I still have NOT included everything being produced (or planned) like the Mibra mine in Brazil currently producing 90,000t of spodumene concentrate .............
"AMG has currently committed to invest approximately US$160mn to build two new lithium concentrate plants at the Mibra mine. Once completed, the two plants will produce 180,000t of lithium concentrate per year," the company's senior VP corporate, Steve Daniels, told BNamericas."
There is clearly an existing oversupply of both spodumene and both lithium carbonate and hydroxide as shown by the prices of both still falling. With many miners (PLS included) looking to be part of the downstream conversion, especially to hydroxide, all I can see happening is the 'margin' of the hydroxide converters falling, so it will not be the 'goldmine' that it is made out to be.
Clearly with the sheer cost of building large gigafactories to make lithium batteries, this is the area of the bottleneck in slowing EV production down. Even the estimated 800 Gwh of battery production for 2025 will need about $US80 billion invested in the battery giga factories alone.
To gain the type of investment needed in battery factories, the margin on their manufacture will IMHO have to stay high, just to encourage more investment. I can also see car manufacturers prepared to pay premiums for top quality batteries. Already Tesla is behind on production and blaming panasonic for not producing batteries quickly enough, the Nevada gigafactory is producing at around 24Gwh/a, it's maximum, despite the theoretical 35Gwh/announced production capability.
All I can see for lithium producers over the next couple of years is to batten down the hatches, as we are clearly in a period of overproduction, despite the massive growth rate of the industry.
PLS Price at posting:
46.8¢ Sentiment: None Disclosure: Held
(20min delay)
