Lithium: Year in Review 2015

By IM Staff
Published: Monday, 21 December 2015

A roundup of the year's main events in the global lithium industry.

Lithium stood practically alone in 2015 as a good news story in the world of industrial minerals.

Continued excitement surrounding a predicted demand surge in the electric vehicle (EV) market has revived interest in lithium exploration, with prices continuing to climb.

SUPPLY SECURITY

The year started with a bang as Albemarle Corp. completed its merger with Rockwood Holdings Inc. The takeover gave Albemarle control of Rockwood’s Chilean brine production in the Salar de Atacama.

In July, Albemarle said it would expand its lithium carbonate production with the commissioning of a 20,000 tpa facility in La Negra, Chile. However, the company’s CEO, Luke Kissam, has since said that he expects "no material revenues" from the plant until 2017. 

Keeping its options open, Albemarle later indicated it would also construct a 50,000 tpa lithium hydroxide (to be changed to carbonate, should the market demand it) facility to process spodumene mined via its joint venture (JV) ownership of Talison Lithium Ltd at Greenbushes, Western Australia. This is not expected to come online before 2020.

Scandal and meteorological storms plagued rival Sociedad de Quimica y Minera SA (SQM), which also produces lithium from brines in the Salar de Atacama, though the company insisted that supply was not effected by either.

In April, SQM’s CEO, Partricio Contesse, was sacked amid allegations of tax discrepancies and a political contributions scandal and, despite Chile being generally less vulnerable to weather extremities than its Argentinian neighbours, violent storms in April and August wreaked havoc with local miners.

At the end of 2015, SQM was considering whether to proceed with an 18-month repair work project to bring a port rail network back online, though trucking operations have been implemented to pick up the slack.

Separately, SQM’s stand-off with state-owned Corporacion de Formento de Produccion (CORFO) over lease payments at the Salar de Atacama continued, with CORFO pushing for the repeal of SQM’s extraction rights at the salt flat. A decision on the arbitration process is expected in mid-2016.

Across the border in Argentina, FMC Corp. had relatively a quiet year. The election of centre-right president Mauricio Macri in November, however, will make the country a brighter prospect for investment in the coming years, with a devaluation of the peso expected. 

Elsewhere in Argentina, Orocobre Ltd struggled to ramp up commercial production at its Olaroz facility. Various bottlenecks delayed the company from reaching a monthly nameplate capacity of 1,450 tonnes, which it now hopes to achieve in early 2016. 

In Australia, Talison, owned jointly by Albemarle and Sichuan Tianqi Lithium Industries Inc., continued its Greenbushes operations, with a production rate of around 350,000 tpa lithium products. 

Galaxy Resources Ltd hopes to join the supply chain next year as it relaunches its Mount Cattlin project. The mine and processing plant are to be operated by General Mining Corp. and is scheduled to produce material for an initial offtake in March 2016 at a rate of 100,000 tpa lithium concentrate. 

MARKET DEMAND

Lithium supply deals struck by Tesla Motors Inc., the undisputed poster child of the EV movement, captured headlines in 2015.

The company signed two separate supply agreements with lithium producers to secure raw material for its Reno, Nevada, US-based Gigafactory, scheduled to be brought online in 2016. One was with the Sonora lithium project in Mexico, owned jointly by Bacanora Minerals Ltd and Rare Earth Minerals Plc, which aims to produce lithium from hectorite and polylithionite clays. The other was with Pure Energy Minerals Ltd for supply from its Clayton Valley brine project in Nevada, US. Both deals were for prices below market levels and are subject to a number of conditions.

Separately, talks in late 2015 between Tesla and Chilean government officials have led to speculation regarding a supply deal between the EV producer and the world’s largest copper producer, Chilean state owned Codelco. However, Codelco currently has no involvement in lithium extraction.

PRICE TRENDS 

As the lithium market grows, fears that supply may struggle to keep pace with demand, have caused prices to continue to edge upward. 

FMC announced price hikes of 15% in Q3 2015, while Albemarle increased its carbonate prices by 6% in October. In a conference call in late 2015, SQM indicated that its prices had risen by about 9% over the first nine months of the year.

China’s Jiangxi Ganfeng Lithium Co. Ltd increased the price of its lithium carbonate twice in October, bringing prices to Rmb 70,000/tonne ($10,875/tonne*), a 67% jump on what they were at the beginning of 2015.

Local rivals, Sichuan Xingsheng Lithium Industry Co. Ltd and Sichuan State Lithium Material Co. later followed suit, raising their prices to Rmb 68,000/tonne ($10,564/tonne).

MARKET OUTLOOK

Demand for lithium in traditional applications is expected to continue to climb gradually, but lithium-ion (Li-ion) technology has become something of a promised land for producers.

Stormcrow Capital Ltd predicted that demand for lithium in Li-ion batteries will almost triple from around 69,000 tonnes lithium carbonate equivalent (LCE) in 2015 to around 200,000 tonnes LCE by 2025, moving from 38% to 49% of the total market.

Goldman Sachs, meanwhile, has suggested that a significant uptick in EV demand will lead hybrid and EVs to grow from accounting for 1% of the automotive market in 2010 and 3% in 2015, to 7% in 2020 and 22% by 2025 – or 25m vehicles.

Of this, hybrids are expected to account for the majority, but grid-connected vehicles – plug-in hybrid electric vehicles (PHEVs) and pure EVs – are expected to grow at a compound annual growth rate (CAGR) of 37%, accounting for 8m vehicles by 2025.

A number of battery producers intend to bring online major new production facilities in 2016 and over the coming years, resulting in an increase in lithium demand. 

In 2016 alone, the Panasonic-Tesla Gigafactory will become operational, bringing online 35 gigawatt hours (GWh) of capacity; LG Chem plans to start production at a 7 GWh plant in Nanjing, China; and Foxconn should complete a 15 GWh facility in Anhui, China. Meanwhile, BYD and Boston Power will bring online a further 20 GWh and 10 GWh, respectively, by 2020, at various sites in China.

On the supply side, juniors are likely to continue to buy up lithium prospects in Nevada, but in terms of new production, many eyes will be on Orocobre as it attempts to overcome its bottleneck issues and on Galaxy’s Mount Cattlin, which aims to come online in Q1 2016.

As demand continues to rise apace and supply plays catch up, prices are likely to continue to rise.

*Conversions made December 2015