Because the world strikes to new sources of power, metals similar to lithium can have an more and more vital position to play, with many governments now waking as much as the truth that constructing key uncooked supplies provide chains is important for the longer term.
The US has pushed ahead with plans and investments into essential minerals provide chains, and so has Europe, in an effort to meet up with Asia.
“There’s an unimaginable dependence on China at the moment, and clearly the US authorities is making an attempt to place an agenda to decrease that,” Livent’s (NYSE:LTHM) CFO Gilberto Antoniazzi stated at this yr’s Fastmarkets Lithium Provide and Uncooked Supplies convention. “Geopolitics is totally in play, and that’s why regionalization is being pushed by governments.”
US-based Livent operates its lithium enterprise within the Salar del Hombre Muerto in Argentina and can also be at the moment producing certified battery grade lithium hydroxide in each the US and China.
Trying forward, one of many major developments that might emerge within the lithium market is the creation of regional clusters, the place manufacturing of lithium occurs at an area stage — a transfer that may be welcomed by prime producer SQM (NYSE:SQM).
“I do not suppose there are numerous industries which have such a very good development prospect over the approaching years — and that implies that lots of lithium can be required,” Felipe Smith of SQM stated throughout a panel on the occasion held in Phoenix. “We are going to want manufacturing of lithium in every single place. That features Chile, in fact, however the US, Europe and Africa as properly.”
With gross sales of electrical autos anticipated to proceed to surge in key markets, demand for lithium is forecast to develop exponentially, and if there’s one factor producers agree on is that extra provide is required. Figures as to how a lot output can be required fluctuate barely, however the pace at which the trade has to scale as much as attain these ranges is unprecedented.
The chief from SQM, which operates its major lithium enterprise within the Salar de Atacama in Chile, stated the market is rising and can want new provides of 200,000 to 300,000 metric tons (MT) of lithium yearly. That was in regards to the dimension of the market in 2018.
“That implies that you want roughly 8 to 10 new initiatives approaching stream yearly,” he added. SQM is aiming to increase its manufacturing capability to 210,000 MT of lithium carbonate and 40,000 MT of lithium hydroxide subsequent yr.
Producers ideas on Goldman Sachs oversupply name
A latest report from funding financial institution Goldman Sachs (NYSE:GS) introduced again the controversy a couple of potential lithium oversupply, with some consultants strongly disagreeing with the analysts evaluation of the trade. But it surely isn’t the primary time analysts have made an oversupply name on this market, with some remembering Morgan Stanley’s 2018’s views of lithium.
When requested about their ideas on the report, Albemarle’s Norris stated that on the demand aspect, Goldman Sachs numbers are a lot decrease that what the corporate sees sooner or later. “We predict you might be unsuitable,” he stated on the Fastmarkets occasion.
On the provision aspect, the financial institution’s numbers aren’t as totally different in mixture, however their make-up isn’t the identical, Norris defined.
“If costs go to the place Goldman Sachs says they will go, we’re in bother,” he stated. The financial institution is asking for a crash in lithium costs to a mean of simply over US$16,000 per MT by 2023. “If you happen to consider in EVs, we’re in bother as a result of (that value stage) can’t help among the greater price initiatives.”
Livent’s Antoniazzi agreed, saying he additionally has a really totally different view in the marketplace than the funding financial institution’s analysts. “The lithium extraction in China we don’t view as optimistic as Goldman Sachs described within the report,” he stated, including that impurities, high quality and value curves have been all challenges in a few of China’s lithium sources.
International provide development wanted
In distinction to the oversupply worries uncovered by Goldman Sachs, Norris of Albemarle stated that to maintain up with demand, each current producer supplying the market at the moment should double each two to a few years for the subsequent decade.
“No producer has been ready to do this reliably so far,” he advised the viewers in Phoenix throughout his keynote presentation.
Albemarle plans to construct a processing plant with 100,000 MT of annual capability within the US, the place the corporate additionally owns lithium brine operations. The Charlotte-headquartered firm is aiming to extend its lithium manufacturing capability 5 instances to 500,000 MT per yr by 2030.
And it’s not solely Albemarle and SQM calling for extra provide all over the world. Chinese language prime producer Ganfeng (OTC Pink:GNENF,SZSE:002460), whose major supply of lithium uncooked supplies is Mount Marion in Western Australia, additionally agrees.
“We’d like lots of lithium to be produced and extracted everywhere in the world, and this can require cooperation between companions and nations,” Wang Xiaoshen of Ganfeng Lithium stated. “This was once a really small trade … the dearth of expertise, human sources, expertise … We have to cooperate collectively to provide extra lithium.”
Ganfeng’s companion Pilbara Minerals (ASX:PLS,OTC Pink:PILBF) was additionally current at this yr’s Fastmarkets lithium occasion and highlighted the necessity to construct an ecosystem with the cooperation of each actor within the provide chain.
“We’re seeing the trade develop in all instructions, and due to that we’re seeing ambitions collide with realities,” stated Dale Henderson of Pilbara Minerals, which operates its 100% owned Pilgangoora lithium-tantalum asset in Western Australia.
Might carmakers get into lithium mining?
The key automotive manufacturing facilities all over the world are primarily based in North America, Europe and China — which suggests these nations or areas would require an increasing number of lithium in coming years.
“None of these nations or areas can survive with what we learn about provide with their very own home sources, they must depend on the likes of South America, Australia, doubtlessly Africa with a purpose to meet their ambitions,” Norris stated.
For unique tools producers (OEM), securing lithium provide to satisfy their electrification objectives is turning into a problem, which is why the query on whether or not they might turn into miners sooner or later continues to return up.
However mining lithium isn’t a straightforward job and one which, regardless of hypothesis, is difficult to think about an automaker being concerned in, SQM’s Smith emphasised to the viewers in Phoenix final week.
“It’s important to construct a studying curve — the sources are all totally different, there are numerous challenges by way of expertise — to succeed in a constant high quality at an affordable price,” he stated. “So it is troublesome to see that an OEM, which has a very totally different focus, will actually have interaction into these challenges of manufacturing.”
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Securities Disclosure: I, Priscila Barrera, maintain no direct funding curiosity in any firm talked about on this article.
