Was an interesting article with many thoughts that align with my own. It is long, but I will post the central section up to his future predictions list for those that may not want to click the link:
"Lithium Assumptions, September 2020"
... The most damming assumption made by supposed experts is that the lithium chemicals going into high end EV batteries are a commodity and will behave from a supply and demand as other commodities do. Big name influencers such as Fastmarkets, CRU and Morgan Stanley continue to bang the commodity drum. Fastmarkets went so far this month as to posit that Chinese converters are now “calling the shots”. This kind of wrong-headed conclusion simply shows that much of the lithium commentary is based on guesswork and a fundamental lack of understanding. Does Fastmarkets think that spodumene producers and converters can continue to operate and expand when many are cash flow negative? Of course, in defense of the “commodity camp” the rapid growth in WA spodumene supply did crash chemical precursor prices (aka spodumene concentrate) and the “wild west” market in China where quality is NOT king saw lithium chemical prices drop quickly as well. So how do I “explain that away”? I am not in denial about what is going on in China vs the rest of the world. China does try to treat lithium as a commodity. The “Middle Kingdom” makes a significant percentage of their batteries and lithium products at the low end of the market. Look at where the “Tier 1” battery makers are located. For the most part, it is in Korea and Japan not China. Look at the disparity in price for high quality carbonate and hydroxide battery makers pay in Korea and Japan vs China. Carbonate for battery use still averages above $10,000/MT in both Japan and Korea. Hydroxide prices remain from $1,000 to $3,000/MT higher than carbonate price in those two countries depending on the month and the mix. The fact is: outside China, battery quality lithium prices are much higher now than they were in 2015 although they are well below the panic market prices of 2016-2018 that were totally disconnected from the cost curve. A fundamental flaw in the “lithium as a commodity” narrative is: despite the fact that lithium demand for battery use has been growing at double digits rates for several years (pre-covid) with 2020 being a likely exception, e-transport growth is just getting started. Demand growth from 2021 will spike - the often cited “hockey stick”. Significant demand for EVs on the mid to high end with the majority coming from outside of China is a “coming attraction”. The highest quality lithium chemicals with specifications many suppliers can’t consistently meet will be required to make battery packs for those vehicles. Much of the prior growth (ex Tesla) has been low to mid-end EV demand in China which has seen corners cut on battery quality and generated more than a few EV fire videos that continue to happen. Quality matters now and will matter even more in the future as the pressure to have higher capacity and better cycle life continues. Battery quality lithium remains a specialty chemical. My personal favorite among wrongheaded lithium assumptions is consistently made by several commentators who repeatedly state that lithium chemicals from hard rock are the highest quality and most consistent with a corollary being: brine operations can’t feed consistent battery quality hydroxide. Both statements are incorrect. For most of the history of the lithium ion battery, the vast majority of lithium chemicals used in cathode were brine based. Chemicals made from hard rock by converters in China didn’t begin to catch up with brine-based chemicals from a quality perspective until 2014. I was involved in that transition, so I remember it well. For more than half the life of Tesla ALL their EV cathode came from brine-based hydroxide. I had most of that business via my employer at the time FMC, now Livent, who had more than 90% share with Rockwood, now Albemarle, having a small share initially from a pilot plant that was also using brine-based feed. Unfortunately, certain “cleantech” industry podcasts and writers know so little about lithium that they repeat erroneous information to large audiences. Recently one often cited and “retweeted” source was called out by two lithium companies for incorrect statements made on their platform. There is very little fact checking done in the podcast world and Twitter is even worse as a source of inaccurate info. Everyone is entitled to their own opinion. Everyone that makes predictions regarding lithium or any other industry will be incorrect more often than they would like; however, there are many facts that are not subject to debate, and it is important to know the difference between facts and opinions. In early 2014, in a meeting with Tesla regarding their recently announced Gigafactory, I advised them that the “Big 3” lithium producers did not have the hydroxide capacity to supply anywhere near what Tesla would need for a 35-gigawatt hour facility which was based on SMM’s excess lithium usage at the time about 28K MT of LiOH. My advice was to get Panasonic (their cell supplier) in tow and go to China to qualify new suppliers. At the time, current supplier Ganfeng’s product wasn’t qualified for Tesla’s cathode. The best quality and consistent hydroxide still came from FMC/Livent and brine. Multiple hydroxide suppliers operating in China now are qualified in Tesla’s supply chain but two are US companies (Albemarle and Livent) with long processing experience from both brine and hard rock. The only lithium project Tesla has seriously pursued via purchase offer was geothermal brine not hard rock. The fact is the BOTH brine and hard rock can make high quality lithium chemicals. Quality relates more to the resource and the skill set / process of the individual producers. Generalizations about one class of lithium (brine, hard rock, sedimentary) are sophomoric at best and should be critically examined. Ultimately the most damaging incorrect assumption is probably the one being made by many auto OEMs and large battery producers and that is: enough lithium will be available for their EV plans without any action on their part.Based on lack of investment it is already too late for the lithium industry to support demand of 1,000,000 MT by 2025/26. As the market moves from 60% of demand being battery related to 85% battery in the next five years, the fact that significant existing industry capacity was built before EV quality requirements were known and only a portion of that capacity can meet the new specs exacerbates the issue.
(20min delay)