The processing plant, as seen in 2011, at Talison Lithium’s Greenbushes lithium mine in Western Australia, which produces about half of the world’s lithium supply. Talison is a joint venture between Albemarle and Tianqi Lithium. Credit: Talison Lithium.
POSTED BY: TRISH SAYWELL DECEMBER 11, 2017 VOLUME 104 NUMBER 1 JANUARY 8 – 21, 2018
Regulations in China that plug-in hybrid electric vehicles and fully electric vehicles must make up 8% of all new vehicle production in the Asian juggernaut in 2018, rising to 10% in 2019 and 12% in 2021, will drive increasing demand for lithium, Alex Laugharne, principal consultant at CRU Group, tells The Northern Miner.
“As much as there is a huge amount of mine-level development activity going on, there is a possibility of delays in getting that material out of the ground, ramped up, and then producing the highest quality that the market is after, so there are potential bottlenecks at each step in the process.” Alex Laugharne
Principal consultant, CRU Group
The New York-based analyst for the commodity markets research and consulting firm forecasts the stricter policies aimed at cleaning up the country’s excessive smog, will see China produce about 5 million fully electric vehicles (EVs) by 2025, up from a few hundred thousand today, and about 2.2 million plug-in hybrids (PHEVs), which have both combustion and electric engines. Globally, his figures total 7.2 million EVs and 2.5 million PHEVs by 2025.
China isn’t the only nation trying to wean its drivers off gasoline. Britain and France hope to ban fossil-fuel powered cars by 2040, while Germany’s parliament has called for a ban by 2030, and India has committed to phase them out as early as 2020.
As a result, demand for lithium, and lithium carbonate equivalent (LCE), the most widely traded of lithium products that goes into the cathodes of lithium-ion batteries used in electric cars, will more than triple between now and 2025, Laugharne estimates, moving from about 229,000 tonnes LCE in 2017 to over 700,000 tonnes in 2025.
While there isn’t much transparency when it comes to LCE prices (there is no organized lithium exchange and buyers and sellers typically price LCE by contract), Laugharne estimates that prices ranged from US$10,000 to US$12,000 per tonne in 2017, for an average of US$11,500 per tonne, up from about US$7,500 per tonne on average in 2016, and about US$5,000 per tonne in 2015. Prices for 2018, he says, should be quite close to the levels seen in 2017.
“We’re expecting prices through 2018 to sit at a pretty similar level to this year, and most products are at all-time highs,” he explains, noting that CRU price assessments take an average of some of the import trade numbers and its analysts also talk to companies and traders in the market. “The peak should stick around for another year before moderating a little beyond that.”
In terms of LCE content in batteries, fully electric cars (EVs) obviously contain more lithium than PHEVs. For example, a Tesla Model 3 contains a 60 kilowatt hour battery pack, while the battery in a Chevy Volt, a PHEV, contains an 18 kilowatt hour battery.
“That means that Tesla needs three or four times the amount of nickel, cobalt and lithium in its battery pack than a Chevy Volt does,” Laugharne says. “The battery formulation that contains most lithium per kilowatt hour of battery capacity has about 20%-30% more lithium than the one that contains the least, and in the future, we would expect the less lithium-intensive battery will take a larger share of the market. Still, that impact is not going to be huge. Declining lithium intensity isn’t a dramatically negative effect, because of the growth in the overall demand for batteries.”
Cost of ownership modelling favours EVs over PHEVs, he adds. While the list price for a Tesla is about US$35,000 and that of a Chevy Volt about US$34,000, and less than that once government subsidies are thrown in, owners of fully EVs will benefit from more cost savings over time.
“Our calculation assumes that running purely on a battery versus having both battery and gasoline would be cheaper over the life of the vehicle,” he says.
In addition, Laugharne expects the cost of making a lithium battery will continue to come down. In 2015, it cost about US$300 a kilowatt hour to make a lithium-ion battery and since then the price has dropped to around US$150-200 per kilowatt hour. (For Tesla to produce a 60 kilowatt hour electric battery would cost sixty times US$150-200 or about US$9,000 to US$12,000 and for the Chevy Volt to produce an 18 kilowatt hour electric battery it would cost US$2,700-US$3,600.)
Tesla Motors’ entry level Model 3 electric vehicle. Credit: Tesla Motors.
“That’s far less than half the list price of the cars and that’s come down substantially already so you will be able to offer these cars at a lower list price and still get a margin,” he says. “And that will make battery electric vehicles cheaper in the future.”
As for fuel-cell electric cars, which have an electric engine (but unlike EVs, store hydrogen gas in a tank and generate electricity from converting hydrogen gas into water), CRU doesn’t see a big market for at least another decade.
Laugharne notes that while some people believe the lithium market will be oversupplied in 2018 and 2019, which will push down prices, his analysis suggests otherwise, and explains that the LCE used in making batteries for electric vehicles has to be of a higher quality with fewer impurities than for many of the other products that use LCE.
“We think additional bottlenecks on the supply side will keep the market more balanced over the next few years, which means prices will not come down a long way,” he says. “As much as there is a huge amount of mine-level development activity going on, there is a possibility of delays in getting that material out of the ground, ramped up, and then producing the highest quality that the market is after, so there are potential bottlenecks at each step in the process.”
Currently about 50% of the world’s lithium supply comes from brine operations in Chile and Argentina and the remaining 50% from mines in Western Australia, the largest of which, called Greenbushes, has been producing lithium ore (spodumene) for the last 25 years.
The Greenbushes mine, about 250 km south of Perth, is operated by Talison Lithium, and is a joint-venture between U.S. specialty chemical giant Albemarle (NYSE: ALB) (49%) and China’s Tianqi Lithium (51%).
The lithium ore from Greenbushes is turned into spodumene concentrate and exported to China, where it is converted into lithium carbonate. In the brine operations, by contrast, the lithium is typically converted in-country and then shipped as LCE. The partners are going to start processing some of their spodumene concentrate into lithium hydroxide for battery production at a new plant they’re building in Perth’s southern suburb of Kwinana.
China has also begun to produce a small amount of lithium from small domestic brine and hard rock operations, and that amount “may grow over time,” he says.
Longer term, additional supply is likely to come from Canada, where there are four to five advanced projects that could start producing material in the next five to six years, Laugharne estimates. There will also be supply coming from other lithium hard rock producers in Western Australia.
Jason Brewer @JBrewerMining 8m8 minutes ago
The processing plant, as seen in 2011, at Talison Lithium’s Greenbushes lithium mine in Western Australia, which produces about half of the world’s lithium supply. Talison is a joint venture between Albemarle and Tianqi Lithium. Credit: Talison Lithium.
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