The below article was written by Mining News quoting a report on lithium put out by Deutsche Bank today. They assume price falls from the highs of last year due to China EV subsidy policy changes. Also they assume PLS will only begin production in 2019 and AJM in 20121.
I Know AJMs timeline is pretty tight to commission in Q4 this year but to suggest 2021 seems ridiculous to me given all the approvals - the $40m investment we got and bulk earthworks having started! Financing to be announced end of this this month
What am i missing? What do Deutsche know that even the company doesn't?
Lithium fatigue as China changes course on EVs
ELECTRIC vehicle fan Deutsche Bank has released a lithium report that is relatively bearish for this year due to Chinese policy changes. The market outlook may explain why WA’s battery-powered lithium racers are all in the slow lane and in need of a recharge. The Metal Detective, by Stephen Bell.
The lithium hopefuls had a merry old time for much of 2016 but this year has proved to be a more sobering experience for WA purveyors of the wonder metal.
Five local companies mentioned in a new report by Deutsche Bank – Altura Mining, Galaxy Resources, Kidman Resources, Neometals and Pilbara Minerals – have retraced between 11% and 30% from their CY 2017 market highs.
The damage looks even worse on a 52-week basis: the falls range between 28% and 50%.
There is plenty of hot money chasing cobalt, another battery metal, but lithium seems to be running out of charge – at least until China gets its new EV subsidy regime bedded down.
Even Deutsche Bank, one of the more bullish investment banks on lithium, struggles to put a brave face on the near-term outlook.
Nine months after releasing its inaugural lithium report, DB’s 34-page ‘Welcome to the Lithium-ion Age 1.1’ reveals that battery costs continue to fall, supporting the economics of electric vehicles.
“However, incremental supply from Australia and Argentina along with stricter Chinese EV subsidies has seen Chinese lithium prices fall 31% since mid-2016,” DB says.
“With two more projects ramping up this half, prices face short term headwinds,” it says.
“However, the medium term outlook is strengthening, “with global auto companies setting ambitious EV sales targets from 2020 onwards”.
China’s new policy on EV subsidies was disseminated early this year, after delays caused by official investigations into several instances of rorting the old system, which mostly favoured production of LFP or lithium-iron-phosphate batteries.
Those delays caused much uncertainty in the Chinese battery supply chain as manufacturers waited for the government to signal its preferred EV battery technology.
The new scheme favours high energy density lithium batteries such as NMC (nickel-manganese-cobalt) or NCA (nickel-cobalt-aluminium), seen as the best option for passenger and heavy haulage EVs.
It is likely there will be a lag effect while the Chinese battery industry aligns itself with the new rules and tailors its investment plans.
This is likely to cause a “dampening effect on sales in the world’s major EV growth market this half”, DB says.
Despite forecasting a 24% increase in lithium demand this year to 263,000t lithium carbonate equivalent, the bank predicts a “slight” surplus” by the end of 2017 as new projects (Mt. Marion, Mt. Cattlin, La Negra II) help lift global production by 30% to more than 270,000t LCE.
“We forecast lithium pricing to remain elevated relative to historical averages, but retrace over 2016 pricing levels (we assume pricing is 15% lower on average).”
Another interesting aspect of the DB report is its conservative assessment of the timelines for the next wave of WA projects – all in the Pilbara.
It doesn’t make happy reading for Pilbara Minerals or Altura Mining, as DB predicts that Mineral Resources’ Wodgina project will easily beat both of their respective Pilgangoora projects to market.
The bank tips significant production out of Wodgina by late 2018, as it is confident that MinRes can bring Wodgina online 9-12 months after an investment decision.
In contrast, DB expects Pilbara Minerals’ first concentrate shipments to occur in “early 2019”, much later than the company’s own forecast of 1Q 2018, while Altura may not arrive until 2021.
Pilbara Minerals CEO Ken Brinsden, naturally enough, doesn’t agree with DB’s stance.
“Deutsche has us commencing production in 2019 and I am looking forward to proving them well wrong,” Brinsden told MD.
“Final environmental approvals should be through this month and we prepared for the commencement of major earthworks in April,” he said.
“We will commence commissioning the plant by the end of this calendar year.”
Brinsden also insists that Pilgangoora’s scale, grade, proximity to port, and strong recovery characteristics will deliver a “very low cost base”.
“Pilgangoora will be the Rio of the hard-rock lithium world and that, combined with the high-grade concentrates the site will produce, means there will be a strong place for Pilbara in the market for the foreseeable future.”
He gives DB credit for its stance on demand, which is higher than most of the other big banks, “albeit in our view still understates the demand growth going on in China”.
The bank is also likely “overstating” the supply from South American brines, Brinsden says.
“Brines are not really part of the material near-term supply solution.
“Some tonnes are coming on however they are a drop in the ocean compared to current demand.”
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