Ringfenced: Will traditional lithium users be left behind?

By IM Staff
Published: Thursday, 27 April 2017

With almost every new and established lithium producer choosing to focus on supplying the lucrative battery market, Rose Pengelly, IM Correspondent, looks at whether traditional industrial lithium consumers in the glass and ceramics industries risk being left behind.

by Rose Pengelly

But while the surge in lithium consumption by the batteries sector has pushed up prices and made it economical for new mines to open and existing producers to expand production, the rush to supply the lucrative battery market could leave users of industrial grade lithium, also referred to as technical grade lithium, undersupplied, or facing unsustainably high prices for what was until recently a fairly inexpensive raw material.

As battery demand for lithium continues to climb, incumbent and prospective producers of the mineral are, seemingly without exception, developing technologies capable of manufacturing battery grade lithium from a variety of sources, including brines, hard rock ores and clays.

According to IM’s Global Lithium Market: Five Year Strategic Outlook Study, batteries currently account for around 35% of lithium consumption worldwide, with frits and ceramics the second largest market at 31%.

Lithium carbonate is used in glazes and bodies of glass and ceramics, to impart a range of physical and performance benefits such as increased thermal stability, improved mechanical and tensile strength, lower absorption, chip and chemical attack resistance, reduced shrinkage and better energy efficiency in the manufacturing process.

Glass and ceramic products exposed to high stresses and temperatures, such as hobs for cookers and glass scintillators used in spectroscopy and oil and gas exploration, are among the applications where the addition of lithium carbonate is currently indispensible.

Major global manufacturers including French glassmaker Saint-Gobain and US kitchenware specialists World Kitchen – owners of the brand CorningWare – and German ceramics maker Schott AG all use lithium-based materials in their products.

Ceramics and glassmakers have, to date, kept any concerns they may have about future lithium sourcing and prices close to their chests and none of those contacted responded to IM requests for comment on this issue. 

But according to some industry observers with contacts in these industries, these consumers are quietly anxious about their supply chains.

"The people who are really worried [about the rising demand for battery grade lithium] are the glass and ceramics makers," says Reiner Haus, managing director of German technology specialists, Dorfner Anzaplan. "A lot of their raw material is going into battery making and nobody is talking about investing in technical grade lithium."

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Acknowledging risk

Last year, Schott published an article, acknowledging rising lithium demand. The company uses lithium in its CERAN cooktop panels, ROBAX viewing windows for fireplaces, its ZERODUR range of glass-ceramics and for various security and fire protection glasses. 

"Our glass-ceramics are based on a lithium aluminium silicate system," explained Dr Martin Heming, director of research and development at Schott. The glass-ceramic is initially manufactured and melted like glass and then formed into the desired shape. The material is then treated at a temperature of 800-900°C to form nanocrystals, which shrink when the glass-ceramic is heated, but leave the main body of the material intact. 

A crystal content of about 70% in lithium-ceramic glasses is enough for crystal shrinkage to negate the expansion of the glass altogether – an effect known as zero thermal expansion. This property means glass-ceramics are resistant to both high temperatures and heat shock, such that even a red-hot glass-ceramic plate can be immersed in ice water without it warping or shattering, according to Schott.

Haus explains that, in some applications it may be possible to engineer alternative formulas that do not rely lithium to impart certain desired properties, but this is not possible for thermal and shock resistance. 

"If you want heat resistant glass and ceramics, then you have no choice but to use lithium," Haus says.

Schott’s article notes that there are limited sources of lithium that can supply the grades it needs to make its glass and ceramics products and also that rising demand from the batteries industry is eating up much of the supply currently available. It expects a lag in the arrival of new lithium supply to lead to higher prices, but stops short of stating that this poses any risk to its business.

Dr Heming does however admit that there is no alternative to lithium for the products Schott makes. "We need a small, highly polar ion which fits into the crystal just perfectly for our glass-ceramics. And the periodic table of chemical elements does not yet have a replacement to offer for the special lithium element."

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Preparing for shortages

According to Jon Hykawy, director of Toronto-based investor research company Stormcrow Capital, the squeeze in supply of ceramic and glass-grade lithium is already happening.

"Glass and ceramics is still a big area of use for lithium," Hykawy told IM. "Good quality spodumene concentrate has low iron and if the grade is about 6% lithium oxide (Li2O), then it can be used in glass to make things like temperature-resistant cooktops. But everyone wants [battery] chemicals, so [Australian spodumene producer Talison Lithium Ltd], for example, has been making less and less high grade spodumene concentrate."

"If no one can provide the glass makers with cheap and high purity lithium units, they have a problem," Hykawy adds.

Industrial grade lithium customers are already facing potential geographical shifts in their supply chains.

Australian lithium company, Orocobre Ltd, which is in the early stages of supplying lithium on a commercial basis from its Salar de Olaroz brine operation in Argentina’s Puna region, currently has a small number customers for its industrial grade lithium. 

The company is currently building a battery chemical plant in Japan to process lithium from Olaroz, through which all of its Argentinean production is expected to pass before being sold.

Speaking at an industry event in London in March, Andrew Barber, Orocobre’s head of investor relations, said that the company’s main focus is on supplying the growing battery market. He assured delegates that the company’s industrial customers "will not be left high and dry" when the company moves its processing operations and main supply base to Japan.

Barber did not respond to IM’s requests to elaborate on this assertion, however. Industry observers suggested anonymously to IM that companies whose entire investment plan is centred on building a battery lithium supply operation, will ultimately relinquish the handful of industrial grade customers they currently have.

They argued that such supply relationships with junior producers tend to be legacies of the companies’ earliest stages of production, when trial lithium batches had an industrial sale value but were not pure enough for batteries and were therefore offloaded at relatively low prices to industrial users.

"Industrial users who have been supplied by these companies will most likely be aware that the deals were only good for a handful of shipments while [the supplier] was ironing out its battery purification process," said one market observer. 

"Once this [lithium source] dries up, [the buyers] will go to [Chilean producer Sociedad Quimica y Minera], who they were probably buying from before anyway."

"SQM will maintain its industrial grade lithium output and will I’m sure be only too happy to take any customers cut adrift [by other suppliers’ decisions to focus on batteries]," they added.

Dorfner Anzaplan’s Haus believes that new lithium suppliers need to be seen to be targeting batteries in order to court and satisfy investors, who are not interested in the relatively unspectacular opportunity to supply ceramics and glass markets.

Hykawy thinks that as long as neither supply nor quality are actually constrained, the relocation of lithium sources is unlikely to worry industrial lithium consumers.

"As long as the customer is convinced that the material is of good quality, shipping costs are the least of their worries at high prices," he told IM.

He explains that processing circuits developed by companies like Orocobre involve making technical grade lithium as part of the standard, lowest cost method for producing battery grade material, so in theory, there will be plenty of lithium available for glass and ceramics producers as supply expands. 

"If someone wants to buy it, as long as there is overall sufficient supply, and as long as someone is willing to pay equal or slightly better margin to the producer, then they will be able to buy their technical grade material. I’m not worried about that, at all," he said.

At present, the majority of global lithium supply comes from brines in South America, with the next largest source being spodumene. Haus says that some glass and ceramics producers could move to using lithium extracted from petalite – a lower grade type of lithium ore that cannot currently be used to yield lithium pure enough for batteries.

He warns, however, that these lithium sources are not being developed fast enough or on a sufficiently large scale to meet the looming supply gap. "There is not enough financing for petalite projects. In fact, the whole sector is underfinanced," he says.

Some market observers believe that the possible shortage of technical grade lithium is overstated, arguing that while new and existing producers promote the battery demand growth story as justification for their projects, many are also likely have an eye on lithium’s traditional markets as a reliable source of potential income.

This may be especially true for companies that experiencing teething problems with their processing technology and end up having to sell purify spodumene that they could not purify into battery grade chemicals, although such situations are likely to only yield technical grade supply in the short term.

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New supply

The surge in lithium prices last year, which has been widely credited to Chinese policies promoting domestic lithium-ion battery and electric vehicle manufacturing, has given rise to and revived enough lithium projects to, in theory, assuage fears of a long-term supply shortage.

Christopher Ecclestone, principal mining strategist at US-headquartered economic research firm Hallgarten and Co., notes that the global lithium mining sector is now on its "second go". 

An initial battery-led boom in 2009-2010 saw the emergence of up to 40 junior lithium companies, of which only Australian producers Talison Lithium and Galaxy Lithium Ltd made it into production, before a wider collapse in the global mining cycle put the brakes on the industry.

The relatively recent history of the last global lithium boom meant that the sector was quick to pick up where it left off and according to Dorfner Anzaplan’s estimates, there are at least 249 lithium projects currently underway across
the world.

Ecclestone warns, however, that little of the fresh money now circulating in the lithium business is going into exploration, with many projects in the hands of "inveterate promoters not intent on production".

"Even with the best will in the world and a financing 'perfect storm’, it could be years before any of the latest crop bring a lithium product to market," he says, noting that the most prospective projects, in his view are developments based on Argentinian salars.

Another issue is the perceived processing bottleneck, with not enough funding being allocated to building facilities for purifying lithium concentrates, compared to the amount of raw material production nominally under development.

This could see backlogs of material ultimately sold into industrial uses just to keep cash flow going for suppliers, which could push battery lithium prices up but ease pressure on the cost of industrial grade material.

Many glass and ceramics producers claim that lithium accounts for a small enough share of their overall production costs not to be a concern, or that if lithium prices do rise to the point where they have an impact on end product margins, these costs can be passed on to producers.

Ultimately, the future of the lithium market remains unclear. Few now seem to doubt the reality of the lithium battery growth story and there is an increasing body of research positing scenarios for this sector. But for glass and ceramics, the long-established supply dynamics of this industry could be in for a shock.