11 minute read
Want to Avoid Lithium Stock Crisis, but is there still time?
demand for lIthIum Is expected to Increase substantIally over the next two decades, rising from 345,000 tons in 2020 to over 2 million tons in 2030. When it comes to the next decade, the most challenging and exciting issue confronting the lithium business is identifying the opportunities to quadruple the production!
SPECIAL FOCUS
Lithium demand is rising steadily and consistently, and there is no going back. Demand for electric vehicles (EVs) will further push the lithium industry in that upward direction; it is predicted that by 2025, EVs will comprise 15% of the automotive market, and we believe that figure will grow to 35% quickly by the end of 2030.
In addition, the increasing application and infrastructure requirements include ESS, 5G devices, and IoT infrastructure, do nothing but add to this lithium call.
The International Energy Agency predicts that this mineral demand for usage in electric vehicles and battery storage would rise by at least 30-folds to achieve climate objectives by the year 2040.
Is it possible to maintain supply? With the recent developments in the industry, we've gotten a glimpse of imminent supply constraints that are expected to set the stage in 2025.
We don’t believe this is a story of looming, acute shortages – yet. Yes, rapidly growing demand will test the market’s ability to expand supply and reduce lead times. But we believe the market will ultimately respond.
Nevertheless, this is not a story of approaching acute shortages yet! Yes, rapidly growing demand will put the market to trial, testing whether the market is capable of increasing supply and plummeting the response times. However, we do believe the market will respond victoriously and satisfactorily soon.
A lot hangs in the balance for the next two to three years, during which there will be a surplus of forecasts and opinions, and participants will be forced to distinguish between significant signals and noise. Let us examine the demand drivers, potential sources of supply, and the most relevant market signals to monitor.
LITHIUM FOR EVS
Lithium demand is driven mainly by electric vehicle (EV) sales. This is a primary factor because EV sales are projected to rise at a pace of 40% annually (compound annual growth rate) until 2025 when EV penetration shall reach an estimated 15%. To meet the $100/kWh target, automakers are exploring diverse battery solutions, targeting drivetrain output, and in so doing, chasing various levels of efficiency.
Tesla has made a no-cobalt battery announcement. VW introduced LFP batteries and high-manganese batteries. The Hydrogen-powered Hyundai EV is already available for order.
Ignoring the fleet-level or model-level choices, most batteries will include 700800 grams of (LCE) per kWh for the short to mid-term and then focus on lithium as soon as the market looks for solid-state batteries in the long term.
Therefore, because of its essential role in the production of cars, lithium will remain crucial to auto manufacturers for some time to come. And this is what makes the supply centerstage!
SUPPLY SOURCES FOR LITHIUM
The combined deposits of the lithium triangle and Australia were expected to provide 345,000 tons of processed lithium in 2020, which was successfully achieved.
Recent disruptions in production have taken place during the last year to a year and a half! Covid-19 limitations in Argentina and low pricing in 2019 and 2020 have increased the burden on existing supply and curtailed future supply development by hindering the involved projects. However, production is projected to rise gradually to about 1.03 million tons in 2025 and 2 million tons in 2030, regardless of what happens in 2020.
LESSER PRODUCTION OBSTACLES
Reactivating production to combat high pricing and strong demand is now felt. Travel limitations from Covid-19 that existed earlier are now reduced. This removal of restrictions shall, in turn, help reduce labor shortages. Based on current mining capacity, we anticipate existing mines to return to total production by the end of 2022, if not sooner.
BRINE CAPACITY OPTIMIZATION
Additional brine capacity is being invested in: SQM and Albemarle will provide a significant proportion of the increased supply. SQM will grow from 70kt in 2020, to rise until the end of 2021 to about 120kt, when it tops out at 180kt by 2023. By the end of 2021, Albemarle will have increased its capacity by 40 kilotons. We also anticipate seeing about 300,000 tons of additional capacity come online by 2025, mainly from new projects and manufacturers.
MINES RESUME FROM MAINTENANCE PHASE
In 2019 and during the first part of 2020, a general economic slowdown restricted investment in constructing supplies. As
SPECIAL FOCUS
a result, Wodgina Mine, Altura Metals, and Alita Resources placed their mines in a care and maintenance approach. This was done to scale back the output. Other companies had to cut down their production levels.
These mines are now scheduled to be back in operation and thus production by the end of 2021, which may extend up to the year 2022 for a complete resume. Expansions shall be added, along with a few additional new operations in this regard, as soon as possible. The pipeline is also gathering up, as projects that are ready to start construction are receiving funding for their final investment choices.
AUSTRALIAN HARD ROCK DEVELOPMENT WILL INCREASE THE SUPPLY
Lithium processing capacity is expanding, and new mines are coming online. With lithium prices above $13,000 per ton, we may expect to see an increase in hard rock output in Western Australia, as both hard rock and brine seem profitable at the moment.
CURRENT SUPPLY TO BE HELPED WITH GLOBAL SUPPLY – DELAYED OR UNDELAYED!
There is a good chance global supply will be established in several places across the world, including the UK, Portugal, Germany, Canada, and the US. Until far, the world's local lithium resources were not felt necessary, but now they are.
It seems that governments have been awoken by the fact that electric power is progressing quicker than anticipated, and they're now concerned about having to depend on other trade blocs to provide this critical raw resource.
The completion of supply chain logistics work would definitely take some time as several policies, and logistical issues shall be addressed, including concerns about
Tahua, Bolivia. Salt miners load a truck with lithium-rich salt. The ground beneath Bolivia’s salt flats are thought to contain the world’s largest reserves of the metal. (The Bolivian Andes may contain 70 per cent of the planet’s lithium.) Many analysts argue that extracting lithium from brine is more environmentally friendly than from rock. However, as demand increases, companies might resort to removing lithium from the brine by heating it up, which is more energy intensive.MATJAŽ KRIVIC/ INSTITUTE
Salar de Uyuni, Bolivia. Brine is pumped out of a nearby lake into a series of evaporation ponds and left for 12 to 18 months. Various salts crystallise at different times as the solution becomes more concentrated. It is also treated with lime to remove traces of magnesium. When the minerals are ready for processing, they are taken to the nearby Planta Li lithium factory to produce the ions that will go into batteries. In 2017, the factory produced 20 tonnes of lithium carbonateMATJAŽ KRIVIC/ INSTITUTE
local environmental problems that can sometimes be considered to be competing with ESG considerations driving the effort to shorten supply chains to help minimize the carbon footprint of lithium (and EVS).
So until the year 2025, we may still see roadblocks; however, by 2030, it must start fueling growth as the local supply system would be well in place by then.
LOWER TIME-TO-MARKET WITH DIRECT LITHIUM EXTRACTION (DLE)
Lithium supply is limited not just by how much lithium is available but also by the time required to get lithium batteries to the point where they can be used in the market.
In our opinion, hard rock lithium will be more widely mined, DLE's influence on brine times will speed up, and extraction of other kinds of ore bodies, such as clays, will bring faster supply to the market.
A LONG-TERM CIRCULAR ECONOMY TO PROVIDE SUPPLIES FOR THE NEXT 7-10 YEARS WILL BE BUILT THROUGH RECYCLING
Recycling is almost non-existent when it comes to supplies. However, the prevalence of commercial opportunities and government regulation, like the EU's Battery Regulation Proposal (a draft of which is expected in January 2022), will speed up the recycling industry.
However, even if the battery life of EVs may be ten years, they are still at risk, as that happens in electronics upgrades. Consumers like to upgrade sooner to keep in pace with the tech inventions, creating a broad recycling base that will, in time, feed the circular economy for lithium very competently! In the end, it's not about having enough lithium in source, but if increased investment, better techniques, and a stronger belief in the market will boost worldwide lithium supplies to 2 million tons by 2030.
Although we believe it is possible, we must convince both planners and investors that they can distinguish good investment ideas from bad over the next two to three years.
ANALYZING THE MARKET AND PRICE TRENDS
Lithium, the primary commodity underpinning the lithium market, has simple fundamental supply and demand characteristics. Cascading and persistent demand will put increased pressure on supplies during the next three decades, that is, by 2030. A narrative has two main parts: From 2025 to 2030, additional supply sources must be online to satisfy demand.
After 2025, how much fresh supply will come into the market depends on how much time passes after 2025. The immediate 2 to 3 years shall be the most critical.
Deciding on the best possible action in a market that is loud and opaque and everchanging, too, is difficult. The urgent need is to be able to access and understand various market signals to make sense of the market.
PRICE SIGNALS: SPOT MARKETS HIGHLIGHT HIDDEN MARKET INTERWEAVES
The Chinese internal local market is usually the primary to react to fluctuating supply and demand, next in line by cif prices for China, Japan, and South Korea.
However, there is a widening gap between the long-term contract prices and the spot market prices because many
SPECIAL FOCUS
contracts have additional pricing elements built into them. Producers who are in long-term contrast fear losing out on the advantages of increasing lithium prices because of an increase in the number of electric vehicles on the road.
Locking up oneself in contracts for such lengthy durations takes away potential gains for shareholders that exist in the current present. So there must be some way out for shareholders to also gain from the current lithium trends.
MARKET SIGNALS: UNRAVELLING NOISE AND SIGNAL
In every market, context needs to be considered, like market context, location context, and historical background. In the 21st century, companies will face two significant challenges: being able to access all forms of information from across the world and then being able to acquire context to comprehend what anyone occurrence means and whether or how to respond.
It will be essential to learn more about projects than just project insights, understanding how long it will take and how much will be produced.
HEDGING SIGNALS: THE CME AND LME LITHIUM CONTRACTS
The newly launched futures contracts from the London Metal Exchange and CME Group eliminate obstacles to participation in a rapidly expanding industry by lowering the risk of price volatility.
POLICY SIGNALS: LOW CARBON ROUTE
All governments—local, national, and international—play a critical role in determining the long-term policy that impacts the lithium market. When supplies are constrained, the propensity for countries to engage in a "resource nationalism" increases. New initiatives are often met with current political, environmental, social, and cultural difficulties. Policies and their effect must be understood by players for players to know whether and how to react.
THE FUTURE
Rising worldwide demand for lithium is anticipated that will keep supply under strain far into the 2030s and perhaps even beyond. continuous wave of investment combined with long-term investment and sound policy will enable us to unleash many new lithium deposits worldwide, which is also aligned with the low carbon footprint objectives of each country.
Lithium market demand has increased and will remain high over the next few years. Current and future market players need signals that are clear and unambiguous so that they may implement effective plans. This aids the development of the whole lithium industry.
TEL: 888-444-7854 X 4 | FX: 888 261 6014 subscriptions@skillings.net
MINING INFO YOU DON’T HAVE TO DIG FOR...
SUBSCRIBE NOW FOR IRON ORE MINING NEWS AND MORE... Check your choice of Subscription
Skillings NewsRoom
Digital Subscription
a 3x Weekly Digital Newsletters:
The Americas, Global and
Equipment a Video News Updates a Digital Monthly Magazine
Skillings Mining Review e-mailed
a Website Full Access
Skillings.net Podcast | Videos
Skillings Mining Review
Print Subscriptions
United Stages Mainland
a Print Monthly Magazine
Skillings Mining Review - Mail Delivered
a Digital Subscription
Skillings Mining Review
Print Subscriptions Global
a Print Monthly Magazine
Skillings Mining Review -
Mail Delivered
a Digital Subscription
One-Month c $4.95 12 Months c $55.00 12 Months c $660.95* One-Month c $72 12 Months c $800 One-Month c $250 12 Months c $2950
*Group License (Unlimited Access Company wide)
Name .................................................................................................. Company............................................................................................. Address............................................................................................... .........................................................Suite........................................... City:..............................State:..........................Zip:.............................. Phone............................. Fax .............................................................. E-Mail ................................................................................................. Subscription Information
c Please Bill Me
Card Number: ................................................Exp. Date: .................... c Visa c Master Card c American Express CVS No. (Security Code): ..........
