AVZ (ASX) Understanding lithium demand

Originally posted by eshmun: ↑

"I get about 2.1 million tonnes of chemical grade spodumene concentrate capacity in 2019, accepting all the yellow in the above btw."

Firstly, thanks for your answer. If you think all this capacity is really going to come on line in 2019 I think there might be a problem based on my base case assumption that Tesla retains its 14% world wide market share in 2019.

With 2 million EV sales in 2018 and Tesla's recent stated market guidance of delivering 400k EVs in 2019, if you use my assumption for the base case (ie Tesla retain 14% worldwide market share of EV sales in 2019) then using your metric of 375,000 dmt of 6% spod for 1 million EVs/annum, the EV market in 2019 will reach

(100/14) x 400k = 2857142 = ~2.86 million cars in 2019 (base case)

which would require 2.86 x 375,000dmt spod = 1,072,500 dmt of spod as per my previous calculation on the PLS thread.

This is approximately half of that 2.1 million tonnes of capacity from that chart. That capacity doesn't include battery grade brine production and small scale production but at the same time my base case calculation doesn't factor in Tesla losing market share (ie expansion of non-Tesla EV car sales in 2019) or demand for battery grade lithium for non-car use.

Nevertheless if you believe that chart actually represents actual realisable capacity for 2019, it leave a big gap between supply and demand with supply based on cars alone exceeding demand (base case) by 2,100,000 dmt - 1,072,500 dmt = 1,027, 500 dmt excess supply in 2019.

To reiterate assumptions here are.

1) 2 million EV sales worldwide in 2018
2) Tesla retain their WW market share of 14%
3) Tesla 2019 guidnace of 400,000 EV car deliveries in 2019 and
4) Scarpa's calculation of tonnes of battery grade 6% spod for the production of 1 million cars/annum (50kg of lithium per car) = 375,000 dmt for 1 million cars
5) Base case supply doesn't include battery grade brine production and aggregate small scale production
6) Base case demand is for EV's only (2.86 million units delivered world wide in 2019 calculated using assumptions 1 to 3 above) does not include non-EV battery grade spod demand for other Lithium ion battery applictions.

Eshmun

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I guess you may have misunderstood my opening post. The EV passenger vehicle forecasts are just that, EV passenger vehicles. In 2018, EV passenger vehicles accounted for 1/3rd of LCE demand. The other 2/3rds comes from 'other' been EV trucks, EV buses, other EVs like scooters, appliances such as your iphones and lithium batteries for the growing stationary household sector energy storage market.

Whilst passenger vehicle growth will grow significantly to 2025 using the forecasts in my opening post this category of 'other' can also grow strongly as well, meaning total demand is the addition of the two.

In terms of supply sources, yes there are brines and the existing hard rock producers who are expanding operations, but the key is supply into the growing lithium hydroxide market. Ultimately it is a question of whether brines and existing producers through their own growth plans will meet all the forecast LCE demand, and if so then there will be no scope for AVZ (or even a BGS) to enter the market by 2025. But I feel there still will be unmet demand but that needs to be quantified and if its there is, AVZ will be in the market by that date IMO.

I treated your graph as potential capacity coming onstream in the next few years - the yellow in your graph - and others have made other suggestions, not saying it is all there in 2019. Ultimately I do expect AVZ to come onstream so tehe question is all about whether it can happen before 2025. The deposit will be developed in due course, it is just a question of when. Obviously SP wise, the later the market sees AVZ entering the market the more unlikely the SP will rise in the short to medium term. It is up to AVZ to get teh project over the line.

I have found the thread interesting, and whilst the focus of my opening posts were around understanding lithium demand the focus should now move to supply gaps and where those gaps will be filled from (been either existing producers and/or combination of existing and new).

And a key is when the exponential growth in EV takeup occurs, because the 2025 figures just for passenger EV alone (and for avoidance of doubt these figures do not include anything in other) are estimated to grow by 9 million units above the 2 million units sold in 2018 (or essentially 11 million EV passenger vehicles are forecast to be sold in 2025 as per my earlier links before looking at other). These forecasts obviously are forecasts.

Personally, I do not believe the market has capacity to accommodate AVZ's entrance into the market in 2020 obviously, nor IMO in 2021, but 2022 to 2025 is a possibility depending on demand. Just to reinforce, if all the expansions in existing producers occur, and I mean occur rather than just be floated as ideas, meaning how realistic are those expansions based on the resources they actually have in the pits JORC based in the measured and indicated category, then the answer of potential entry is closer to 2025 than 2022.

But entry has a number of variables including the supply gap per se and demand growth per se which based on comments in this thread, where many focus on passenger vehicles, there is still a lot to learn and do here forecasting wise. Time will tell who is right.

Interesting time ahead.

All IMO IMO