Lithium Bubble "Fears" Overblown - Tianqi Chief

Lithium ‘bubble’ fears overblown: Tianqi chief Vivian Wu
The Australian12:00AM October 13, 2016
The chief executive of one of the world’s biggest lithium companies says the wave of new supply being developed to meet the red-hot lithium market will take longer to materialise than expected.

Speaking at a ceremony to mark the start of construction at the new $400 million lithium hydroxide processing plant at Kwinana south of Perth, Tianqi Lithium chief Vivian Wu said strong forecast demand growth and a history of issues in bringing new supply on line bode well for the market over the longer term.

“People tend to assume that it’s easy and simple … but from past experience we know that with a lot of projects it’s going to take a lot longer and be a lot harder than you imagine to produce good quality stuff,” Ms Wu said.

Demand for lithium is forecast to surge over the coming years due to growing demand for electric vehicles and home energy storage systems using lithium-ion batteries.

But a spike in prices has sparked a sharp rise in exploration for and development of new lithium deposits, with two new mines in WA entering production this year and construction of a third scheduled to begin in the next two months.

The supply response and relative abundance of lithium has prompted several analysts to warn of a looming crunch in the lithium market, with Sanford C. Bernstein analyst Paul Gait telling clients this week that lithium “demonstrates all the characteristics of a commodity bubble” and that the frenzy could “end in tears”.

Ms Wu said Tianqi was looking beyond the current “bubble” in lithium spot prices and was instead focused on building a quality business that worked with blue-chip customers.
“You will definitely see demand growth, that is certain, you can actually feel and touch it every day in China,” Ms Wu said.

“The bubbles in the short term are not optimal.

“We want the growth to be sustained, as leaders of industry we want to provide good quality stock to the world to make sure that happens.”

The potential for a lithium oversupply rested on the behaviour of the leaders in the industry, she said, adding that producers would need to behave in a disciplined way and focus on quality for the sector’s long-term health.

The processing plant under construction at Kwinana will take lithium concentrate from Tianqi’s 51 per cent-owned Greenbushes mine and process it into lithium hydroxide for use in batteries.

The plan is likely to see Greenbushes — the world’s biggest source of hard rock lithium ore, accounting for around 30 per cent of global supply — double its output, although that plan is reliant on approval from Tianqi’s partner at the mine, Albemarle Corp.

The new lithium hydroxide plant will create up to 500 jobs during its construction and employ around 180 workers once fully operational.

While the looming expansion of Greenbushes has been identified as a significant risk for the smaller entrants entering the lithium sector, the head of lithium producer Orocobre, Richard Seville, said Tianqi’s commitment was a “really promising sign”.

“Tianqi investing in Australia and backing its investment in Greenbushes clearly shows that they see a strongly growing market,” he said.

“It shows a real commitment to and acceptance of a strong demand side.”