The site of Chemetalls lithium project in Silver
As the global lithium industry met in Toronto for
IMs Lithium Supply and Markets
conference (LSM11) in January, it was clear that some
delegates wanted to inject a dose of reality to an industry
characterised by optimism.
The anticipated boom in electric
vehicle production has seen a wave of junior lithium companies
emerge over recent years; potential suppliers for what could
become the combustion engine of the 21st century - the
The bone of contention rests on the
supply and demand outlook over the next decade, and whether
these dynamics leave room for new players in the market.
Supply forecasts are subject to the
capacity of new start-ups and expansions from both established
producers and emerging companies, but the demand side is much
Analysts estimate that demand in
2011 will be in the region of 105-115,000 tpa of lithium
carbonate equivalent (LCE) - carbonate being the main form
in which lithium is sold to battery makers. But demand
forecasts for 2020 vary widely.
On the conservative side,
Chile-based consultancy signumBOX estimates 187,000 tonnes,
while US consultancy TRU Group puts the figure at about 249,000
tonnes and Canadas Byron Capital Markets forecasts
In one of the more bullish
estimates, Metal Bulletin Research/Industrial Minerals predict
in their forthcoming Global Lithium Market Outlook that the
world will require between 290,000 and 380,000 tpa of LCE by
Selected emerging lithium suppliers
Lithium demand by market (tonnes, LCE)
Source: Byron Capital Markets
One thing most analysts agree on is
that the market will grow - by at least 7% a year for the
next decade - and that growth will be underpinned by the
adoption of hybrid (HEV) and electric vehicles (EV).
Lithium demand from these fledgling
motor markets will be negligible in 2011, with Nissans
Leaf EV the first mass-produced EV to hit the market
in North America.
But the next two years are set to
be the turning point. Nissan has indicated that 20,000
Leaf models have already been reserved for 2011 and
has set a target of 150,000 models in the next five years.
Meanwhile, car giants like Toyota,
GM and Ford all plan to launch EV models in 2011 or 2012.
German car maker Volkswagen has set the ambitious target of
producing 10m. EVs worldwide by 2018, while Indias Tata
Motors is aiming for 4m. in the next ten years.
Daniela Desormeaux, general manager
of signumBOX, has estimated the growth of lithium demand for EV
and HEV by projecting the amount of vehicles produced by major
By 2025, Desormeaux expects Nissan
to be consuming 10,480 tpa LCE, with Toyota at 11,453 tpa, GM
at 12,077 tpa and Chinese group BYD at 14,207 tpa.
Based on projections for all
manufacturers, the automotive industry is expected to require
almost 100,000 tpa LCE by 2025. But depending on the rate of EV
adoption, a possible range of 69,400-155,500 tpa is
Analysts at Canada-based Byron
Capital Markets have forecast that batteries will drive about
two thirds of lithium demand growth to 2015, adding 41,000 tpa
LCE to the market.
Of this, about 28,000 tpa is
expected come from the automotive industry and 13,000 tpa would
be bound for smaller cells used in portable electronics.
The adoption of EV and HEV by
consumers will be influenced by the rising price of crude oil,
which reached a long-term high of about $110/bbl (Brent) in
Higher fuel costs, which have been
exacerbated by political unrest in the Middle East and North
Africa, have served to underline the volatility and risk that
comes with oil dependence. Further hikes will narrow the gap in
operating costs between the two vehicle types.
There is a correlation
between the price of oil and the sale of hybrid vehicles -
they tend to move in tandem in that as the price of oil
declines, it presents a disincentive to purchase hybrid
vehicles, said Lara Smith in MBRs upcoming
We have reached peak oil and
therefore expect future higher prices of oil. Further, the
recent unrest in the Middle East and ensuing higher oil prices
may accelerate development of the electric vehicle
markets, she added.
Lithium concentrate plant at Talisons
Greenbushes operation in Western Australia
Speaking at LSM11 in Toronto, Byron
analyst John Hykawy highlighted the strong growth potential in
While the lions share of
attention goes to growth in EV, traditional end uses such as
glass and ceramics and emerging energy applications will also
boost demand significantly.
While the lithium industry is
dominated by talk about the advent of automotive batteries, we
believe there are several other potential growth areas that
could drive substantial demand growth through 2020, said
Byron Capital analyst John Hykawy.
Continued penetration of the
use of lithium in the manufacture of glass and ceramics, solar
energy and nuclear may well lead burgeoning demand through the
course of the next decade, he added.
The Japanese Rapid nuclear reactor
utilises reserves of 6Li metal as a way to
self-moderate the temperature of the reactor, allowing it to
run without operator intervention.
It is estimated that about 1,000
small reactors containing lithium may come into service by
2040, with an associated 1,900 tonnes LCE used in them.
The same control system is
completely adoptable by larger reactors. A typical 1.2GW
reactor size of today is 6,000 times larger than a Rapid, and
would use 11,400 tonnes of LCE, said Hykawy.
We believe that we may see
testing of such systems before 2020, he added. Byron
forecasted that nuclear applications could consume 22,718 tpa
LCE by in 2020.
Solar thermal power could also make
a significant impact on lithium demand by 2020.
A mixture of salts such as lithium
nitrate can be used to increase the temperature at which a
solar thermal plant can operate, according to research at
Sandia National Laboratory.
A 200MW plant would require 2,000
tonnes of salt-based working fluid, of which 25% is lithium
nitrate, according to Sandia.
Byron Capital has forecast solar
thermal power could account for 11,000 tpa LCE demand in
2020 - higher than demand for established applications
such as aluminium production and air conditioning.
Significant growth between 2011 and
2020 is also expected in glass and ceramics (54%), grease and
lubricants (42%) and the small batteries market, which is
expected to double in the next ten years (see chart).
With the increasing use of EV and
portable electronics, growing demand from traditional
applications and the more unpredictable growth in nuclear and
renewable energy, the lithium market has plenty of room for
The big question in the lithium
industry is over how much room this demand growth is going to
leave for new entrants to the supply side.
The presentation that provoked the
strongest reaction from the floor at LSM11 was by Edward
Anderson, the CEO of US consultancy TRU Group, who put a
negative spin on the prospects for emerging lithium
Anderson said the lithium industry
could reach serious peak oversupply by 2017 as
capacity added by new projects outpaces anticipated demand.
There will be no cataclysmic
supply shortage within the foreseeable future... supply could
theoretically be much, much, higher [than demand], said
Anderson, who forecasted global lithium demand to grow annually
by an average of 8% to 2020.
According to TRU, lithium demand is
expected to just exceed 45,000 tpa Li-contained (249,000 tpa
LCE) in 2020, but supply will have risen towards 70,000 tpa
(373,000 tpa LCE) based on new project start-ups and capacity
expansions by existing producers.
Established producers such as SQM,
FMC, Chemetall and Talison are undergoing expansions or have
new capacity in the pipeline, while over a dozen projects claim
they have plans to start up within the next decade.
Anderson believes that the
market - even with an anticipated boom in electric
vehicles using Li-ion batteries - will not provide
opportunities for many new suppliers to enter production.
New developments do turn the
supply curb noticeably north by the middle of the decade.
Existing producers will maintain a dominant position even as
new producers start up, he said.
The supply-demand outlook
suggests projects that have technical issues may be abandoned
even if already constructed. Many might go into production and
fail due to strong competition, especially mineral-based
projects, said Anderson.
This year the worlds first
mass-produced electric vehicle using lithium batteries, the
Nissan Leaf, will be available to consumers in the USA
TRU expects the market for primary
and secondary batteries to represent 45% of global lithium
demand compared with 18% in 2008, but said the technology must
be improved if it is to be accepted by consumers.
Lithium battery technology
still needs development, with the main issues being safety and
durability, said Anderson.
The Nissan Leaf is
arriving well before it is due... a premature baby, so to
speak, he added.
Andersons predictions on the
prospects for junior lithium groups, and especially hard rock
miners outside the lithium triangle in South
America, did not settle well with some delegates at the
The managing director of emerging
Australia-based producer Galaxy Resources, Iggy Tan, has been a
strong advocate of the opportunities for new entrants in the
Reacting to TRUs forecasts,
he said: This sort of thing is sensational, unrealistic
What good [are substantial
oversupply forecasts] to the industry? These sort of
predictions go out to the mass media and it hurts the industry.
We have issue with that, he added.
Tan used the example of electric
bicycles (e-bikes) to illustrate the untapped potential of
lithium-ion batteries in the market. Galaxy aims to be the
largest e-bike battery producer in the world.
We focus on electric vehicles
but there are a lot of low-hanging fruit like e-bikes and
starter batteries... there are 27m. e-bikes produced in China
each year, said Tan, who predicts e-bike producers will
adopt lithium technology over the predominant lead-acid
Galaxy plans to commission a 17,000
tpa lithium carbonate plant in Jiangsu, China, by the end of
the second quarter of 2011.
The plant will process spodumene
concentrate from the groups Mt Cattlin mine in Western
Australia, where Galaxy started production in 2010.
The successful start up at Jiangsu
would see Galaxy emerge as the worlds first integrated
producer of hard-rock lithium concentrate and battery-grade
FMCs operations at Salar del Hombre Muerto,
Decision time for the big
While Galaxys planned
production capacity is relatively small compared with global
supply (105-115,000 tonnes), the group leads a pack of emerging
lithium players looking to carve out a space for themselves in
A key factor in the success of
emerging suppliers will be the actions of the larger
established names in the industry: SQM and Chemetall in Chile;
and FMC in Argentina.
Talison in Western Australia is
also a large lithium producer, but sells lithium in the form of
concentrate to chemical convertors, largely in China.
The director of Lithium Business
Solutions at Chemetall, Rainer Aul, explained at LSM11
that the group plans to expand production at its operations at
Salar de Atacama, Chile, Silver Peak, USA, and the Langelsheim
plant in Germany.
Chemetall has steadily
increased production in the past and expects to continue to do
so in the future to meet market needs, said Aul.
The Germany-based group has
capacities of about 33,000 tpa lithium carbonate and 5,000 tpa
lithium hydroxide, which by 2020 it expects to expand to a
respective 50,000 tpa and 15,000 tpa.
The ability of established
producers in South America to quickly expand capacity to meet
demand leads some to speculate that there is little room for
new producers - especially those with higher production
overheads than the brine operations in Chile and Argentina.
The decisions of the big
three producers in South America will also affect the
pricing outlook for lithium.
Daniela Desormeaux, who gave a
detailed outlook on the lithium industry in her presentation in
Toronto, said these producers have two options.
In the first scenario, new
producers are allowed to enter the market, and prices would be
in theory driven by the marginal cost of the last operation
entering the market.
The big three would lose market
share, but prices should remain at existing levels of about
Alternatively, the established
industry could try to nip emerging competitors in the bud by
pricing them out of the market.
The financial weight of these
companies, which all have larger operations in other chemical
industries, would allow them to somewhat offset the lower
The only way to maintain
market share is with an aggressive price strategy in order to
get the new projects out of the market - at least the
projects with higher costs, said Desormeaux.
Out of the three countries that make up the lithium
triangle in South America, Argentina is seen as the most
accessible for outside investors.
Bolivia, which is said to have the
largest reserves, is cut off to overseas mining companies, with
the countrys socialist government taking a state-led
approach to developing its resources (IM March 2010: Doubts
surround Bolivia lithium development).
Chile, the worlds largest
lithium-producing country, categorises its reserves as
strategic because of nuclear applications, which has created
barriers to development.
As a consequence, only four
companies have announced their intention to develop lithium
projects in Chile, while Argentina has been a focal point for
junior exploration companies in recent years.
According to the US Geological
Survey (USGS), Argentina has the worlds fifth largest
known lithium resources, with an identified 2.6m. tonnes
contained in salt brines.
In March, Jujuy province, one of
Argentinas three lithium-rich states, declared it had
also made lithium a strategic mineral, bringing some
uncertainty to projects receiving future mining permits.
A new act, named Decreto
7592/11, states that all present and future lithium
projects must be studied by a special expert commission before
being approved by local and national authorities.
The decision is aimed at preserving
resources in Jujuy - one of three Argentinean provinces
with significant lithium reserves - to create value-added
industries in the region and jobs for local people.
The commission will be coordinated
by the Argentinean Production Ministry and be composed of
experts from the Argentinean National Council of Scientific and
Technical Research, the University of Jujuy and the
Environmental Department of Jujuy.
Following the commissions
valuation, the project can then be approved or rejected by the
Argentinean Production Ministry and the Provincial Secretary of
This new regulation will have
an impact on the projects that are currently under evaluation
in the province, since it brings new steps and new
procedures, Desormeaux told IM.
This situation brings
uncertainty to the other projects that are currently being
developed in Salta and Catamarca provinces, since current local
legislation does not classify lithium as a strategic mineral,
but this situation can change in the future, she
Companies developing lithium
projects in Jujuy province include Lithium Americas
(Cauchari-Olaroz), Orocobre (Olaroz), Dajin Resources (Salinas
Grandes) and Rodinia Lithium (Salinas Grandes).
Lithium Americas told
IM that the company did not expect any delays
to its Cauchari-Olaroz project Ð one of the most advanced
lithium projects under development in the region.
In Argentina, the mining law
is a federal law and the provinces cannot change it. The
provinces only legislate on the environmental approval
process, said the groups CEO Waldo Perez.
There were concerns in some
portions of the Jujuy society that the current system to
provide environmental approval needed to incorporate more
actors in [local] society, and that is what they did, he
Lithium Americas said the decree
would not affect its environmental baseline report for
Cauchari-Olaroz. However, Perez said there would be increased
requirements for the projects final exploitation
Rodinia, which said it was still
assessing the impact of the developments, pointed out that its
flagship project in Argentina - Diablillos - was
located in neighbouring Salta province.
Technology brings new era
The next decade will be a period of huge transition for the
lithium industry, with both supply and demand set to rise
faster than ever before.
By 2010 EVs will be a noticeable
presence in cities from New York to Beijing, and changing
lifestyles in developing countries will substantially increase
demand for consumer electronics.
Alternative applications for
lithium could be found in new energy technologies, such as
next-generation nuclear power, solar thermal plants and grid
storage systems, and battery recycling is expected to become
Demand growth, both projected and
real, is already driving the diversification of world supply.
This year could see three emerging companies, Galaxy, Rincon
Lithium and Simbol, with fresh supplies of lithium carbonate on
Time will tell if lithium supply will become a truly
diverse, global industry, or whether many of its young entrants
will fall by the wayside when the competition gets
Geothermal lithium nears market entry
California-based Simbol Materials is set to become the
worlds newest entrant to the lithium carbonate market as
it plans to start a 500 tpa high-purity plant within the next
The group has developed technology
to extract lithium from geothermal effluent brines to produce
lithium and other compounds and will process 99.999% purity
lithium carbonate as a derivative product.
Simbol will process lithium
extracted from a geothermal power plant at the Salton Sea,
southern California, in a process that eliminates the solar
evaporation stage critical to the worlds leading brine
producers. A three-fold capacity expansion is expected to be
The initial production will utilise
a lithium carbonate plant acquired from Limtech Lithium
Industries, which has been relocated from Shawinigan in Quebec,
Canada.ÊSimbol also plans to produce zinc and manganese
from plants connected to the geothermal plant in the
We are adamant on retaking
the market share Limtech had and expanding. Weve already
done the designs and engineering to expand the facility to
multiples of its existing capacity, Simbols CEO
Luka Erceg told IM.
As we move forward, we expect
to connect to geothermal plants that give us 16,000 tpa of
capacity for lithium carbonate equivalent (LCE). Our existing
resource relationships will provide us, currently, with the
ability to build four such plants, he added.
Based in the San Francisco Bay
Area, Simbol is owned by privately held Silicon Valley
investors, Mohr Davidow Ventures and Firelake Capital.
Last July the company sold a
minority stake to Itochu Corp., giving the Japanese chemical
group the sole rights to market Simbols future products
Itochu intends to supply the
growing market for lithium-ion batteries -
particularly for electric and hybrid vehicles - in
Japan, China and South Korea.
For a small company like
ours, entering the Asian markets would be challenging, but
Itochu provides us with near-instant access to the relevant
markets, said Erceg.
The CEO believes Erceg will be able
to compete with the major low-cost brine-based lithium
producers present in the market, which include Chile-focused
SQM and Chemetall along with FMCs operation in
Competitive with brine
Demand for lithium carbonate
equivalent is expected to rise to over 250,000 tpa by 2020 and
Erceg believes the increased market cannot be supplied by the
developers of hard rock-based lithium resources.
We feel there are too many
challenges [for hard rock producers] and the costs of
production are too high. We feel we can be competitive at
whatever price the industry sees... were not concerned
about pricing volatility, he said.
The world doesnt need a
lot of lithium producers. The world needs good quality lithium
producers. And there are opportunities in the marketplace to
compete with Chemetall, FMCÊand SQM on quality.
By producing lithium from the waste
stream of a geothermal power plant, Simbol will be the first
supplier of its kind in the lithium industry, which is
undergoing a period of unparalleled expansion driven by
anticipated growth in demand for electric vehicle
While viewed as just another
emerging lithium company, Simbol has a unique position as it is
the only company that can produce lithium, manganese zinc and
other important battery materials from one brine, one plant, as
mixed-metal precursors before they leave our gate, said
According to reports by IM, Simbol is set
to become the second newest lithium carbonate producer in the
wave of emerging players due to hit the market, with Rincon
Lithium starting up production in Argentina in December.
Chinese convertors expect stable prices
China is the worlds largest consumer of lithium, and
plays a major role in converting hard-rock lithium concentrate
into lithium chemicals for use in industries such as glass and
Southern China-based chemicals
group, Jiangxi Ganfeng Lithium Co. Ltd, estimated that
hard-rock spodumene imports to China accounted for about 18,000
tonnes LCE in 2010
Imports of brine-sourced material
were estimated to be about 12,000 tonnes LCE, including lithium
carbonate, lithium chloride and concentrated brine.
Chinese brine-based lithium
producers only supplied technical grade lithium carbonate and
lithium hydroxide at an output of about 8,000-10,000 tonnes LCE
last year. Glass grade spodumene (5% L2O, CIF Asia)
is currently being traded in a $430-480/tonne range, with
lithium carbonate from brine at about $4,500-5,000/tonne.
Speaking to IM,
Ganfeng executive vice president, Wang Xiaoshen, said he
expected prices for lithium raw materials to remain stable over
the next three years.
We have not worried about
supply shortages, but were worried about concentration of
supply sources, Wang said.
But now with the optimistic
demand estimation for the new energy industry, there is more
investment into lithium resource developments, and the supply
concentration will be going down, so we expect prices will be
relatively stable until 2014
Then we will see how the EV
and energy storage industries are going, and how the new
lithium resource projects are going. It seems big capacities
will be installed in 2014 for lithium carbonate, Wang
Ganfeng expects demand for lithium
chemicals to grow for most of its main consuming industries,
including primary and secondary lithium batteries,
pharmaceuticals and polymers.
Demand for some applications, such
as flux and lithium bromide for absorption air conditioning,
are expected to remain flat.
China is likely to remain a major
target market for hard rock lithium miners, especially those
with no plans to convert raw materials into lithium
Emerging spodumene miners such as
Galaxy Resources, Reed Resources and Canada Lithium will aim to
emulate Talison Lithium, which has long been supplying lithium
chemical converters from its Greenbushes operation in Western
However, Galaxy is also planning to supply material from its
own 17,000 tpa lithium carbonate plant under construction in
Jiangsu, eastern China.