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The table above sourced from Goldman Sachs shows the battery factories that are coming online this year to 2020. In an exciting development, Panasonic has announced that they are building
another lithium-ion battery factory in 2017 to be located in Dalian, China. This
article states that annual capacity will be for 200,000 electric vehicles.Referencing the table above (
Evs equivalent capacity),
this is additional capacity that's 40% of Gigafactory 1. If
mining.com's figures can be believed, 40% of 126,000 tonnes is 50,400 tonnes of new graphite demand coming online in 2017.
In other developments, the
Sydney Morning Herald reported that the lithium price has almost doubled since October 2015 due to "rising demand from lithium ion battery and electric vehicle manufacturers" combined with a supply shortage.
The graphite price has not doubled because steel production is down in China. Alas. But the story on China is not as dim as the markets would have you feel. Referencing the following chart from the IMF on the Chinese residential property market, and particularly the green line"Floor Space started (baseline adjustment)" and the blue line "Floor space started (demand pickup)":
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Floor space started (i.e. construction that uses a lot of steel) is forecast to bottom in 2016 (blue line - demand pickup) or 2017 (greenling - baseline). So when will floor space started and hence steel demand increase? Will it be 2016 or 2017?
For it to be 2016 (which we want), aggregate demand for residential property needs to increase in China. If I had to wait for a market driven solution I'd be pessimistic but enter the Chinese government. Xinhua (the official government news source) reported in December that:
"
Starting next year [i.e. 2016],
China will roll out policy to transform 100 million farmers into registered urban residents, according to Xu Shaoshi, head of the National Development and Reform Commission, on Tuesday."
This is what's called hukou reform and I'd recommend learning about the
hukou system on Wikipedia to give yourself context. Scholars have been calling for hukou reform for a long time and if China comes through with this this year, it would significantly add to demand for residential real estate because up to 100 million people who previously couldn't buy property now can (I can't understate how massive this is - don't believe me, look into it). I think it's safe to say that referencing the IMF chart above,
the blue line looks like the highest probability when the Chinese government delivers sometime this year on hukou reform.
I've been thinking about this for the last week and if this scenario plays out, it will be one of the biggest contrarian calls ever (look at Chinese sentiment today). But the more that I read about it, the more likely it seems to me (definitely feel free to disagree but please provide data or some sort of empirical contribution). The Chinese government are motivated to reduce oversupply and as a command economy they can definitely enact hukou reform. The key point will be what percentage of the newly registered urban residents want or can afford to buy city apartments?
Stanley Druckenmiller says that to make money, you need to invest 18 months ahead. Looking 18 months ahead into Kibaran's future, where would the share price be with 1) production, 2) more battery factory announcements globally like the first article, 3) Chinese steel demand increasing, and 4) a graphite price that starts appreciating significantly like the lithium price when 2 & 3 culminate? Things have been quite dour lately waiting for finance, but it's nice to see some exciting news.
