General Comments & Banter, page-10173

Almost Steve.

I don't think it will take 2 years for the demand Tusunami to hit.

To be clear...

• Car makers use JIT (Just in Time) to reduce: space; cost; and capital invested in plant & equipment.
• Automakers these days are assembly plants, every component is sourced through strategic supply partners (right down to the cigarette lighter)
• They start working with these supply partners two to three years before the first car gets assembled. It's a VERY close working relationship, where every style change and engineering requirement is worked out collaboratively. Cost per component targets and volume commitments are negotiated "on the fly" during this process, with every supplier working toward the end-point when the final car comes together. It's a massive undertaking, and the whole industry (car makers and supply chain) are very good at it, and use very sophisticated and well understood processes.
• One would imagine that auto manufacturers are engaged right now with battery makers working through hundreds of design and development (D&D) programs working on every aspect of the battery design - form and function. This means they in-turn will be researching where the Lithium will come from. It's not just price, quantity, and availability - but also precise chemistry. As the automakers tweak the design spec, they will be adjusting battery weight, charging requirements, physical shape, manufacturability, voltage, amperage, peak power output, power connections, monitoring circuits, crash safety - everything - and this will have implications right back to the Lithium supplier. Hence, it's understandable that AGY are currently batch-testing custom brews at the request of the battery makers as they work through their D&D programs.
• A key consideration for both battery maker and big auto will be "to what extent can we standardise battery packs - and what would that look like?" - I would be betting that will be a major and currently unresolved issue.

To be assured of security of supply to meet the final program, battery makers will have to commit to a Lithium mine (an OT agreement) and if that includes allowing time for the mine to ramp-up they need to be doing it SOON. To be sure, Automakers will have flagged this as a major strategic supply issue and will be asking battery makers to provide more than just "trust us, we'll find a way to make it happen" - they will want progress reports and will want to see signed agreements 18 months out.

A further major issue will be "if Lithium miners can't get finance then we may have to step in to solve that problem or we won't have supply."

By my reckoning, to meet the ambitious model release targets that look like hitting hard around 2020, OT agreements will start being signed up thick and fast, early to mid next year.

Next year, Lithium mines (and other battery metals) will have a boom year.

Even though AGY's resource is small in terms of published JORC, the real bottle neck is the processing and the added value is chemistry customisation capability (chemical and process engineering). The miner that can demonstrate capability earliest will be in the box seat.

With the cost of Lithium being a small fraction of the total car cost (under 1% - compared with (say) the seat package being 5 to 10%), you can see that big auto has a compelling business case to "throw money at it" to make sure Lithium supply isn't a show stopper.

IMO

DYOR