LSM15: Politics and tech to determine lithium market development

By Albert Li
Published: Thursday, 18 June 2015

Government support coupled with rich domestic resources helped to cement Chile’s position as the world’s leading producer and prospective market entrants have highlighted favourable policies as key to fostering progress in the sector, although the main growth driver will remain demand from new lithium-based technologies.

Political and technological developments are expected to shape the evolution of the global lithium industry until the end of the decade, delegates at IM’s 7th Lithium Supply and Markets Conference heard in Shanghai, China, this week.

Daniela Desormeaux, general manager of Chile-based market intelligence firm, SignumBox, told delegates that Chile is eager to retain its position as the world’s leading lithium supplier with the help of government support.

The country supplies 60-65% of the global lithium carbonate market and its lithium resources have been officially protected for 40 years, after the Chilean government declared it a strategic mineral in 1975.

This was followed by a raft of policies designed to foster the sector’s maturation, including auctionsfor contracts to exploit lithium brines in the country’s salars and the establishment of the National Lithium Commission in 2014.

The implementation of progressive policies has not always been plain sailing, however, with the September 2012 lithium tender becoming mired in controversy after the winner, Sociedad Quimica y Minera (SQM), was stripped of the contract less than a month after the auction, owing to outstanding legal issues between the company and the Chilean state.

In January this year, a number of fresh measures were proposed to the Chilean president, Michelle Bachelet, and Desormeaux said that a new lithium policy is likely to be announced in the near future.

David Merriman, senior analyst at UK-based Roskill Information Service, discussed how thanks to government backing and the richness of Chile’s lithium resources, the global lithium industry is presently dominated by Chile-operating heavyweights, but said that challengers to the established market players are looking to shake up the lithium supply chain.

These include Canada-based Nemaska Lithium Inc., whose CEO, Guy Bourassa, explained how the company’s phase one lithium hydroxide (LiOH) plant is being built at Salaberry-de-Valleyfield in Quebec to provide a North American source of lithium products from Nemaska’s hard rock Whabouchi property.

Mine permitting is scheduled to finish in the third quarter of 2015, Bourassa said, while commercial samples of the company’s production will be available in Q3 2016.

Other challengers include Australia-based Neometals, which is developing the Mt Marion spodumene project is south Western Australia along with a patented electrolysis process to produce LiOH, and fellow ASX-listed Orocobre Ltd, which is working to bring its Salar de Olaroz lithium brine extraction facility in Argentina up to 17,500 tpa capacity by the end of this year.

Orocobre’s chairman, James Calaway, agreed that government policy was a key determinant of the lithium industry’s ability to progress, but stressed that other factors – namely, environmental conscientiousness, growing unbanisation and technology developments – were the main market drivers.

Calaway also noted that many junior lithium projects have faced delays, meaning that supply is not expanding at the same rate as demand.

Energy storage

According Qiang Chen, general manager of China Energy Lithium Co., growth in demand for lithium is likely to come from the energy storage sector, as there is currently insufficient capacity to retain generated energy for use on tap.

Chen said that the next generation of energy storage batteries could be made of lithium metal or lithium-sulphur, which could lead to a doubling of lithium demand. According to his calculations, 3,000 tonnes of lithium metal produced last year required 20,000 tonnes of lithium compounds.

China Energy Lithium is working with institutes both within and outside of China to develop new types of energy storage batteries. Chen pointed out that lead batteries have been used for 150 years and while 95% of the volume of these batteries can be recycled, lithium-based materials cannot currently be reused.

As the technology develops, lithium battery recycling may be realised in the future, he said.

 Lithium demand by market_Roskill
Batteries are not the only important end market for lithium (source: Roskill).

Electric vehicles

Aside from energy storage, which has gained increasing prominence in the new lithium technology sphere over the last year, the topic of growth potential in the lithium-ion (Li-ion) battery market for electric vehicles (EVs) remains central to industry discussions.

Juan Carlos Zuleta, a lithium economics analyst and member of the National Technical Commission of Lithium in Chile, listed some key factors to watch for in future lithium supply and demand dynamics.

By the end of this year, global plug-in sales will surpass the 1m mark for the first time, Zuleta said. This indicates that growth of Li-ion batteries for automotive applications will keep rising, he said, but noted that demand for lithium batteries for other uses may lag behind.

 EVs by brand_LMV Automotive

Tesla may have to compete with other OEMs for its lithium supply (source: LMV Automotive). 

 

For Tesla Motors Inc., which has become the poster child of the budding EV revolution, Zuleta suggested that the momentum generated by the company as it ramps up its Nevada, US-based Gigafactory to produce half a million batteries by 2020, may encourage other original equipment manufacturers (OEMs) to join the march towards electrification in the global automotive industry.

This trend could be further enhanced by a possible stabilisation in oil prices sometime in 2016, with forecasts placing the market at $60-65/barrel (bbl) next year, up from $58-59/bbl today, which will make electric cars competitive against petrol and diesel-fuelled vehicles.

In terms of growth in lithium demand, Zuleta said that this will be intimately related to the EV market, and that Tesla may find itself forced to compete with other automakers for lithium supply.

He suggested that the all-electric bus segment, where the introduction of wireless hypercharging is likely to foster a growth spurt in the next two-to-three years, and the aerospace industry, where electrification is expected to start within the next five years, will all be vying for lithium raw materials.

Zuleta said that Tesla may also have to bet on other non-lithium based technologies such as magnesium or sodium-based batteries, although he stressed that the hype over new lithium-sluphur batteries was premature, since there are still a number of kinks in the technology’s performance that still need to be ironed out.

 



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