China Trip. The Lithium Demand Story

Thought I would share this with AJM holders. One further point I make is that speed to market is more important than I first realised.

Our group just returned from China and met players who as usual were from different levels. You can quite clearly separate the opportunists from the real brains behind the country. It is the brains behind it that have made China the most successful modern civilisation taking some 500 million out of poverty in a few decades. Something no western country has ever achieved.

The point is you have to accept China warts and all, and yes there are warts. You cannot however assume everyone is an opportunist. I have watched, studied, visited and lived in China since 1982 and I am very aware of the different levels of business. They are as different as you can possibly imagine.

We met with the top Lithium experts for China along with the top researchers for EV's and battery manufacture. Their knowledge was more impressive than I have seen in the west. I have traced China's plans for New Energy back to as early as 2002 so they certainly did show a lot of foresight. As usual the brains trust is tied to Beijing where everything begins.

It was very interesting to gauge the demand estimates between processors, mineral experts, battery experts and EV researchers. Even more interesting that on an intellectual level they have the same aspirations as we do for a cleaner world.

My overriding opinion is that western analysts in general have almost no comprehension of future demand. I say 10 times the lithium by 2023 and my only concern is I may be underestimating it.

We have excellent models and SN and I often discuss those models. Typically such models must adhere to known facts and that s one of the issues with the whole demand issue. For example I see demand really snow balling around 2023. However there will be period where supply/demand on existing models levels. Personally, although I understand the structure of a model, I think there will be no flattening for two main reasons.

RANGE: The BMW i3 is a classic failure as an EV, and there are others. Manufacturers are now very aware that the failure is directly tied to range anxiety. For this reason we will see the volume of lithium used for EXISTING ev's almost double imo. That will come from the need for more range (already happening) and the replacement of more hybrids (overly complex) for pure EV's. That also means that all future EV's will use more lithium than is currently being calculated.

STOCK PILING: A point missed by many is the billions of dollars being invested by manufacturers around the world. The Chinese are starting to get the fact that lithium as a raw material could be a game changer. As that awareness reaches into other markets, manufacturers certainly will stock pile and attempt to lockup supply. They will not risk supply chain surety for the sake of holding more lithium in reserve which remains a fairly minor cost overall.

Before 2023 the only change I see as possible is crystallised Vanadium producing a better quality battery that gives us the magic 500 KLM to 700 KLM as the norm rather than the exception. Tesla range with much lower pricing means mass appeal. However Va is more a complimentary mineral and not likely to be a replacement. Indeed, if it does what I expect it would only boost lithium usage. I would suggest our own happycats should be very careful of Cobalt predictions based upon EV's

As a side note, I keep saying, this is not just a battery revolution, it's a vehicle revolution. The combination of battery power with a more simplified multi purpose chassis design and drive by wire technology will be the biggest change the auto industry has seen since its inception.