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Tesla And Other Tech Giants Scramble For Lithium As Prices Double

14 April 2016

by James Stafford of Oilprice.com

Demand for lithium—the hottest commodity on the planet and the only commodity to show positive price movement in 2015—is poised to continue on its upward trajectory, becoming the world’s new gasoline and earning the moniker of “White Petroleum”. And the battle for market share in and around this commodity has everyone from major tech players to trend-setting investor gurus vying for a foothold.

Driven by the rise of battery gigafactories and game-changing Powerwall and energy storage businesses, the world now finds itself at the beginning of a lithium super cycle that is all about securing new supply, much of which is poised to come from lithium superstar Argentina.

We have Tesla in the far corner, building its battery gigafactory in Nevada, for which it needs tons of lithium at a reasonable price, and just last week Tesla announced its plans for the Model 3, which has already hit over 325,000 reservations. To give you an idea of just how meaningful this is, Tesla produced less than 50,000 cars last year. Elon himself mentioned during the unveiling that Tesla will be gobbling up much of the world’s lithium supply with plans to produce 500,000 EVs per year. “In order to produce a half million cars per year•we would basically need to absorb the entire world’s lithium-ion production.” Remember—this is one man, one company. Tesla’s soon-to-be-completed gigafactory will produce more lithium-ion batteries than the rest of the world combined.

And opposite Tesla, we have some other major players shifting gears that will affect the lithium space.

Chinese billionaire Jia Yueting is stepping onto Tesla’s playing field with its own electric car start-up, Faraday Future, and Apple is planning one too, by 2019. Through its Alphabet holding company, Google is also getting into the game with plans for a self-driving car.

They are fighting it out not only to be the first to capture the most electric vehicle market share and the best engineers, but they are getting down to the core of this arena, which is lithium—the key element that will make it all work.

This is D-Day for lithium miners, and it’s all about new entrants to a space that is about to change exponentially. Big investors are definitively standing up and taking notice—and even jumping into the game.

One of Canada’s most noteworthy investors in the mining sector, Frank Giustra, is the latest to see lithium for what it is—the single-most valuable commodity of our tech-driven future, and one that is already in short supply.

The investor extraordinaire with a focus on big mining deals has thrown his support behind Lithium X which is exploring in the key “Lithium Triangle” area of Argentina and is the largest land holder in Nevada’s Clayton Valley, the only producing lithium area in the entire United States. Lithium X has over 15,000 acres in Clayton Valley, near Albermarle’s Silver Peak mine, the only American lithium producer right now, and about three hours from Tesla’s gigafactory.

“Right now, there is a lot of ‘smart money’ getting in on the lithium land rush, and a mining legend like Giustra would never have been late to this party in Nevada—but the big attraction is our lithium plays in Argentina, which is ground zero for the commodity in South America,” Lithium X Chairman Paul Matysek told Oilprice.com.

“At the end of the day, Frank likes to get involved in a project if he sees a massive shift in an industry’s fundamentals,” Matysek added. “Lithium is certainly showing all the right signs!”

Floored by the ‘White Petroleum’ Fundamentals

The fundamentals here are impressive, and the catalysts for lithium prices are spectacularly clear—all of which is pushing prices up and creating an aggressively competitive playing field that is likely to see a lot of acquisition talk.

There are plenty of reasons to be bullish about what Goldman Sachs calls the “new gasoline” that will fuel our technology-driven resource era.

According to The Economist, the “global scramble to secure supplies of lithium by the world’s largest battery producers, and by end-users such as carmakers”, among other things, has seen the price of lithium carbonate imported to China more than double just in November and December of last year alone, when it reached an amazing $13,000 per ton. Some contracts in China, according to Bloomberg, have seen over $23,000.

There is no denying that this is a euphorically tight market, with demand rising steadily and expected to spike drastically, and suppliers struggling to keep pace—which means that the door for new lithium supplies is wide open and this is now a fast-paced exploration and exploitation game.

And even without the battery gigafactories, a Powerwall and storage revolution or streets lined with electric vehicles—demand for lithium would still remain steady just to keep up with consumer electronics.

For the electric vehicle industry alone, Goldman Sachs predicts that for every 1 percent rise in EV market share, lithium demand will rise by 70,000 tons per year. Furthermore, Goldman Sachs predicts that the lithium market could triple in size by 2025 just on the back of electric vehicles.

The Hunt for Lithium Is On...

The lithium that is currently being mined quite simply is not enough to put a dent in the projected demand dictated by our hunger for consumer electronics and the pending energy revolution. This means that the new market is all about new players.

Right now, most of the world’s lithium comes from Australia, China and the “Lithium Triangle” of Argentina, Chile and Bolivia. In North America, Nevada is the only player in this game, but more to the point, the U.S. state has the best lithium there is to have lithium found in the brine.

Lithium sourced from brines, or salt water, is the most cost-effective on the market, and sourcing enough of it right at home would be a coup for all sides in the battery, storage and EV game.

And while lithium has traditionally been controlled by a handful of major global suppliers, spiking demand is changing this landscape drastically.

The four companies that currently control the lithium space—Albermarle (NYSE:ALB) in Chile and Nevada; SQM (NYSE:SQM) in Chile; FMC (NYSE:FMC) in Argentina; and Sichuan Tianqi in China—are about to make way for the new entrants.

And when it comes to new entrants, the biggest market share will be scooped up by those who can come up with the most lithium sourced from the brine. That means getting in on the new game in Nevada, but perhaps more importantly, securing positions in the bigger venues, particularly in Argentina.

Within the Lithium Triangle, it’s all about Argentina right now. Chile is not granting any new concessions, and opposition in Bolivia has led to a suspension of lithium mining. Argentina has recently announced a deal with creditors to repay debt stemming from the country’s 2001-2002 default, paving the way for Argentina’s return to global financial markets.

And the Argentina lithium rush is already in full swing, with miners eyeing resources of up to 128 million tons of lithium carbonate.

Investors have been pouring into this sector, according to Argentine Mining Secretary Jorge Mayoral, who recently noted that “all the big auto makers have been present in Argentina trying to get a foot in lithium development”, including Toyota, Mitsubishi and Posco.

For those who come up with the next supply, the industry will come right to them, and the sniffing around has already begun in full force.

Link to original article: http://oilprice.com/Energy/Energy-General/Tesla-And-Other-Tech-Giants-Scramble-For-Lithium-As-Prices-Double.html

April 14, 2016 in Batteries, Market Background, Opinion | Permalink | Comments (11)

Comments

One ton of lithium carbonate is enough to make 2000 kwh of lithium batteries that will cost at least 200,000 USD assuming a very low battery price of 100 USD per kwh. So a price of 7,000 USD for a ton of lithium carbonate is not going to make lithium batteries expensive. Lithium prices could easily double once more and still not be a problem for battery producers like Tesla.

It is a good thing that lithium has increased in price because that leads to more production and investment in new production capacity for lithium carbonate which is needed. Eventually argentines lithium brine will be mined up and other sources of lithium will evolve. The most promising is to make lithium from salt from desalination facilities. Such production does not exist today but there are endless amounts of lithium in salt from seawater so it is not a resource that will ever run out like oil will. And any country with access to seawater can make it. Moreover, lithium can be recycled so the same lithium can continue to power the same stock of vehicles forever. Not so with oil and gas.

So with 128 million ton of minable lithium carbonate in Argentina we could make the batteries needed for 2,560 million cars with a 100kwh battery in each car (100kwh requires 50kg of lithium carbonate so 20 cars per ton of lithium carbonate and 20*128=2560 million cars). There are about 1,500 million vehicles globally so Argentina alone already has all the lithium the world needs.

Lithium can be recycled, all petroleum does is pollute the air water and soil.

Lithium is the gas tank, not the gasoline of EVs.

Remember how the price of processed silicon rose rapidly when large scale production of solar panels started? And then how it fell back after more processing plants came online a couple of years later?

Remember how the price of wind turbines jumped up around 2010 when installation rates took off? And then how the price returned to what it had been once more factories came online?

Remember the story of Henny Penny?

Henrik, thanks for the numbers on the ratio of input cost of raw Lithium compared to the cost of the batteries made by them.

BTW I used to be worried about "Peak-Oil" but I don't anymore. Compared to that, Lithium is no concern whatsoever. It's not like it's consumed. It can be endlessly recycled.

Well with the need for fresh water, desalination plants could be lithium farms too. And they could turn a profit doing so.
Does oven water brine provide any significant lithium? Or is that just land base brackish waters?

I was thinking Australia's water plant could be a very big source for salts. And it would be better for the ocean if they didn't send so much back into it.

Half or more of the fuel used for transportation can be eliminated by requiring new vehicle to be built as hydraulic hybrids with simple gas accumulator tanks but digital controlled pumps and motors and engines. Turbines can eliminate most of the non CO2 pollution. Remember automobiles are not efficient because of the high speeds of operation not bad engines. No batteries are needed. Much cheaper ZEBRA and even lead batteries perhaps can be used as POWER_WALLS; co-generation in homes can lead to lower CO2 release. Qnergy has installed its first Stirling cogeneration at a hotel and demonstrated a wood pellet version. ..HG..

I clearly said that a small gas car is the best solution. Look at that, lithium markets are the only ones having poor quantities and rising prices and petroleum is mature and plentiful and low pollution. These goverments mandate are like usual , only a trick to increase the wealt of the richs and inflate deficits with new taxs hike ahainst the poor and these richs make 10 000$/hour lazying in their wall street tower or in omaha.

Beware the smell of fish, not brine.

Once again an industry will kowtow to the endless mantra of Chinese growth and consumer demand. Following Beijing's policies of hoarding copper and even frozen pork, the Communist government may be in the position, even as we speak, of hoarding and running up the price of lithium. This is simply done through statist policies of alternatively redirecting savings into T-bills, and then liquidating them presently to paper over their economy's cash flow problems and capital flight.

This is an economy which has been estimated to use as much as 8% counterfeit currency to assist growth, and which has managed to increase the public debt to GDP ratio to US levels, with a far poorer and far more accounting-dishonest system than here. Next news will be a catastrophic steel glut: The Economist estimates that 2 yrs Chinese coal use equals the UK's in the entire history of the industrial revolution.

This is a very poor time to gauge the real value of anything -- money, GHG, or lithium.

Time to re-open the mines at Mountain Center, CA.

My bad. I meant Mountain Pass - but Molycorp has fallen on bad times, so I have no other suggestion to the problem of supply - but I know we have plenty of lithium to mine in the USA if countries want to shaft us.

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