Lithium Carbonate Supply After 2025

This one shows the concern for future supply and demand.


Ensuring Lithium carbonate supply by SQM beyond 2022 up to 2030

Published on January 19, 2018
The recent agreement between SQM and CORFO eliminates the risk of discontinuing supply of Lithium carbonate after 2022 and settles some outstanding disputes with Corfo, the Chilean development organization. The full impact of this agreement is limited by the time to market of new Lithium carbonate plants in Chile. Analysts evaluations are overstating the impact to the Lithium market regarding supply and demand in the short and midterm. Mainly, the agreement reduces some concerns about the sufficient availability of Lithium carbonat and Lithium hydroxide after 2025, where anyhow Lithium demand will substantially grow further.
1. Supply and demand balances in public reports have been considering a going concern of SQM’s operations in Chile.
a.   However, given the current rate of Lithium extraction at the Salar de Atacama the operation would cease in 2022, unless an agreement is reached between SQM and CORFO. This agreement, now, reflects the prevailing analysts assumptions. Accordingly, there will be no additional supply gap of approx 60,000 MT/a LCEs after 2022.
b. According to a recent publication by Canaccord Genuity (Lithium Supply and Demand Conference May 2017) a supply of 750,000 MT LCE will be needed to satisfy demand in 2025. Considering the upside potential of additional 130.000 to 150.000 MT LCE it would take about 8 to 10 years to install this capacity. Therefore, these volumes will narrow the gap between growing supply and demand needs especially after 2025.
Referring to other calculations published (Lithium Americas investor presentation, Dec 2017) additional capacities of about 660.000 MT LCE might get on stream. However, some projects are assuming unrealistic timelines and cost assumptions or are still seeking financing. Assuming a failure or delay rate of 30-40% the overall volume would ease about 250,000 MT LCE of annual supply in 2025.
2. The lease agreement between SQM and CORFO ends 2030. Based on the agreement the operations and assets at the Salar would be then taken over by Corfo. This has an considerable impact on investment decisions because of substantial capital requirements and amortization needs for new Lithium carbonate plants.
3. SQM and Corfo agreed on a new royalty sceme adding substantiell cash costs. Based on the recent SQM Q3/2017 average price, cash costs would increase by 2,500 USD /MT for Lithium carbonate.
4.   To build production facilities for an additional capacity of 130-150,000 MT Lithium carbonate or Lithium hydroxide is a substantial challenge as a 50,000 MT unit has been never built in one phase. Also, infrastructural requirements need to be considered:
a.   Fresh water and electricity
b. Engineering and operator resources in the South American mining districts
c.   Available land for building the additional capacity
Gerrit Fuelling – The author is acting as advisor to OEMs and tier1 suppliers in the automotive industry together with other former senior managers of Rockwood Lithium, the world market leader in the Lithium industry.