Lithium’s ‘traditional’ markets and their price buffer role

By Josie Shillito
Published: Friday, 20 March 2015

Attention to lithium’s traditional applications in ceramics and glass has been usurped by a focus on the energy storage market. However, non-energy storage uses like greases and ceramics continue to take up at least two thirds of worldwide lithium production. Josie Shillito examines how this may change as demand for lithium in energy storage grows.

Cobre Montana’s February 2015 investor presentation did not mention them. In FMC’s 2014 full year earnings report, there was no trace. Even Chile’s Sociedad Quimica y Minera (SQM), the world’s largest producer of lithium, made no specific comment in either its 2014 earnings statement or accompanying conference call.

Conspicuous by their absence, few are talking about the role that lithium’s traditional applications – ceramics, greases and glass – play in the mineral’s end user markets, and the focus has turned instead to the impressive growth forecasts for lithium driven by batteries and energy storage demand.

Yet greases, glass and ceramics have an important function in bolstering the global lithium industry and will continue to do so while energy applications are still in their relative infancy. 

Consuming around two thirds of lithium production worldwide, according to Roskill Information Services, these applications are valuable consumers of globally expanding lithium capacity. The ongoing usage of lithium in glass and greases puts a cap on lithium pricing, as end users are unlikely to spend more than $6,000/tonne on lithium for grease. Until lithium substitutes are found, the so-called traditional applications market will keep prices from spiking due to electric vehicle (EV) and energy storage demand. 

 "Lithium’s use in other industries acts as a price absorber for fast-rising prices," Jon Hykawy, president of North American consultancy, Stormcrow Capital, told IM.

Historically, traditional lithium applications made up around three quarters of the lithium market. In recent years, this has shifted to two thirds as demand from the lithium-ion (Li-ion) batteries manufacturing sector has grown.

According to the latest figures from the US Geological Survey (USGS), the current market share is as follows: Ceramics and glass consume 35% of the lithium produced worldwide; lubricating greases account for 8%; continuous casting mold flux powders, 6%; air treatment, 5%; polymers, 5%; and primary aluminium production makes up 1% of the market. Other uses, which include pharmaceutical, collectively account for 9%. 

Lithium batteries make up the balance which, while not inconsiderable at 31% of the market share, still skirts under one third of overall market demand.

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The arrival of Li-ion

The Li-ion battery was developed in the 1970s, but it has only been in the past fifteen or so years that its usage has become widespread. 

Between 2002 and 2012, world total production of lithium grew 116%, according to British Geological Survey and Natural Environment Research Council data. The uptick coincides with the mass adoption of lithium batteries in mobile phones. Even six or seven years ago, it was common to have a removable battery in a mobile phone but not anymore.

"Smartphones is where the growth has been," Stormcrow’s Hykaway said.

To put the 116% growth in context, lithium production between 1992 and 2002 grew 74%, and from 1982 to 1992, the figure was 81%. In the decade prior to that, the market shrank by 13%.

"If you go back to the mid-1990s the majority of lithium was used in ceramics and glass, so the trend is certainly for batteries to increase and ceramics/glass to decrease as a proportion of the total," Theresa Brown, mineral commodity geologist at the British Geological Survey, said.

The smartphone market has gone through its major growth phase, even though more smartphones will continue to get made, said Hykawy. The new demand for lithium will come from EVs and energy grid storage.

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Traditional markets trail energy applications

According to Roskill’s Lithium Market Outlook to 2017: "Consumption of lithium exceeded 150,000 tonnes lithium carbonate equivalent (LCE) in 2012 and demand is set to grow at 9.7% per year in the base-case scenario, with the EV market becoming increasingly important for growth towards the latter part of the forecast period."

The growth in traditional lithium applications markets is expected to be far slower.

"[Traditional] lithium applications are not going to grow faster than GDP," said Hykawy.

Lithium’s texture and chemical properties have made it an essential component in a number of non-energy storage usages for many years.

As a mineral concentrate or purified chemical, it can alter the quality of glass by increasing durability without affecting the other qualities such as density. In ceramics, lithium oxide (Li2O), or 'lithia’, is used to reduce melting temperature and improve brilliance. The texture of lithium cryolite (chemically named trilithium hexafluoroaluminate, or Li3AlF6) makes it suitable for abrasives, welding agents and soldering, while lithium carbonate’s (Li2CO3) water and CO2 absorption qualities make it a highly effective component in greases and lubricants.

Non-battery uses make up 69% of the lithium market, according to Roskill’s 2014 estimates.

"Substitutions for some non-battery uses could emerge, said Hykawy.  Spodumene, an aluminium silicate mineral which is presently one of the main commercial sources of hard rock lithium, could be a starting point for developing replacement materials. As an example, the mineral’s properties make it increasingly useful as a mineral concentrate within abrasive compounds, Hykawy explained."

 "It replicates the hard bit of the mineral in lithium," Hykawy went on.

The concentrate can be lower quality, but chemical grade spodumene material is also priced far beneath lithium’s $6,000/tonne selling value, at around $400/tonne.

"The only reason to continue using it in greases is because there is no substitute, either from a performance or a chemical perspective," said Hykawy. 

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Greases still make up a significant share of
lithium’s end-market demand.
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Albemarle to focus on industrials

It is unsurprising that junior lithium companies looking to fund new projects have homed in on the eye-catching growth projections of exciting new markets for lithium, such as EVs and batteries, which make an attractive case for potential investors.

But while even established producers like SQM and FMC have dropped the mention of traditional markets from their releases, US-based Albemarle Corp., which recently merged with Rockwood Holdings Inc. to form a new speciality chemicals major, has stressed that it is not wholly reliant on growth in new markets and given existing uses for lithium a high billing in its future strategy.

In an investor call accompanying Albemarle’s third quarter earnings statement in October last year, CEO Luke Kissam said that he remained assured about the growth prospects for lithium and surface treatment applications, which would help drive expansion in the new joint business, even if the predicted expansion in the EV market failed to materialise.

"I am just as confident, not wavering at all on the growth aspects, long term, for lithium, as well as for [the] surface treatment business," he said, adding that the company anticipated "excellent growth in lithium (...) with or without the EVs".

Kissam said that Albemarle had been looking to enter the lithium market for some time and that Rockwood had been an obvious "strategic fit" for the chemicals manufacturer, which makes bromine-based flame retardants and catalysts, and that Albemarle was "undecided" about whether it would continue with its own lithium carbonate project in Magnolia, Arkansas.

"From a customer standpoint, lithium and bromine derivatives overlap in serving a number of global end markets, including consumer electronics, automotive, polymers, Ag and pharmaceuticals, and the combination will provide increased customer reach and access," said Kissam.

"Likewise, Albemarle’s aluminium alkyls and Rockwood’s lithium alkyls serve both the polyolefin and synthetic rubber markets. [Being one] company, they can provide both lithium and aluminium alkyls for production of different polymer types, [which] should result in increased selling opportunities for the combined entity," he added.

Robert Zatta, who took over as Rockwood’s CEO in June 2014, was more effusive about the potential offered by new lithium markets. He said that the two firms’ complementary portfolios are "expected to generate significant growth through the continued penetration of lithium-based energy storage products."

Even Kissam admitted confidence in a growth spurt from emerging lithium technologies. "We expect that there will be an inflection point in lithium around 2017 (...) We remain excited about this business’ growth potential," he said.

Lifting the cap on prices

As batteries become a larger part of the market, the price cap of traditional applications for lithium will act as a shock absorber for price. However, over time, as the battery market continues to expand, there is likely to be upwards pressure on lithium pricing, depending on supply.

"As the buyers for grease shrink down to, say, 25%, they still hold excess capacity, they are still in the market. However as price rises even more they will become marginal buyers that cannot pay the market rate. They are out," Hykawy told IM.

"The day that demand for batteries exceeds supply is the day that lithium prices rise dramatically."

Industry checks suggest lithium carbonate pricing could test $7,000-8,000/tonne in 2020, according to a presentation by Credit Suisse Equity Research at the American Region Specialty Chemicals conference in May 2014.

The question for traditional applications of lithium is how high the price can go before you search for a substitution. However, the traditional applications of lithium means that there is a quantity of lithium currently in use that could be diverted to lithium batteries as the price of the mineral rises.