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leads lithium into new era as IPO season tests investor appetite","ganfeng-leads-lithium-into-new-era-as-ipo-season-tests-investor-appetite","article/ganfeng-leads-lithium-into-new-era-as-ipo-season-tests-investor-appetite",{"_uid":557,"date":558,"tags":559,"editor":563,"content":573,"excerpt":773,"featured":50,"reporter":774,"_editable":778,"component":779,"seo_title":553,"categories":780,"visibility":789,"author_company":49,"featured_image":790,"seo_description":773,"author_full_name":49,"author_job_title":49,"formattedDate":795,"formattedArticleDate":796},"2239049a-bbe0-4362-be39-102be66f4c78","2018-10-16 00:00",[560],{"slug":561,"name":562},"ganfeng","Ganfeng Lithium",[564],{"slug":565,"name":566,"content":567},"matthew-bird","Matthew Bird",{"job_title":568,"image":569,"bio":571,"linkedin":572},"Senior Editor - Supply Chains & Data Visualisation",{"filename":570},"https://a.storyblok.com/f/287943243085208/512x512/14738033ec/matthew-bird.jpeg","Matthew writes, edits and produces content for Benchmark Intelligence and Benchmark Source across the whole mine to grid supply chain. He also acts as a liaison to the press. He has a PhD in electrochemistry from the University of Nottingham.","https://www.linkedin.com/in/birdmatthew/",{"type":574,"content":575},"doc",[576,583,588,593,598,603,608,613,618,623,628,633,640,649,658,665,670,675,690,695,700,705,710,715,720,729,734,739,744,749,758,763,768],{"type":577,"attrs":578,"content":579},"paragraph",{"textAlign":49},[580],{"text":581,"type":582},"Investment sentiment surrounding the lithium industry entering into Q4 has started to turn negative at a time when the industry enters what Benchmark Mineral Intelligence has termed the Era of the IPO.","text",{"type":577,"attrs":584,"content":585},{"textAlign":49},[586],{"text":587,"type":582},"The lithium industry’s leading producers – Ganfeng Lithium, Tianqi Lithium, and FMC Lithium (soon to be rebranded Livent) – are on the verge of initiating initial public offerings (IPO) to become the first lithium producers since Orocobre to be pure-play lithium companies floated on an exchange.",{"type":577,"attrs":589,"content":590},{"textAlign":49},[591],{"text":592,"type":582},"China’s Ganfeng Lithium is expected to beat its competition to its IPO with a listing on the Hong Kong Stock Exchange, seeking $676m from a first-time share sale. Its fellow lithium chemicals competitor, Tianqi Lithium Corp, is also seeking a Hong Kong launch at a reported $1bn valuation.",{"type":577,"attrs":594,"content":595},{"textAlign":49},[596],{"text":597,"type":582},"Meanwhile, the IPO receiving most attention – certainly from New York and London based institutional investors – is that of FMC Corp’s lithium spin off IPO under the name Livent. The valuation of Livent will be a real barometer of investment appetite for lithium stocks which have suffered in 2018.",{"type":577,"attrs":599,"content":600},{"textAlign":49},[601],{"text":602,"type":582},"There have been investor fears of oversupply for the last 12 months and the performance of China’s domestic lithium carbonate prices, despite not being matched by the rest of the world prices, have sparked concern.",{"type":577,"attrs":604,"content":605},{"textAlign":49},[606],{"text":607,"type":582},"Yet, for medium-to-longer term lithium investors it has provided a buying opportunity that three major producers set to go public are seeking to take advantage of.",{"type":577,"attrs":609,"content":610},{"textAlign":49},[611],{"text":612,"type":582},"Ganfeng has been the most active deal maker of the three suppliers. It is a specialist converter of a wide variety of lithium chemicals including the in-demand battery grade lithium hydroxide and lithium metal. It has also been the most aggressive in its expansion plans and striking supply-side deals for feedstock spodumene material with Pilbara Minerals, Mineral Resources and Neometals.",{"type":577,"attrs":614,"content":615},{"textAlign":49},[616],{"text":617,"type":582},"Ganfeng’s latest and most significant supply side investment to date was securing 37.5% of Lithium Americas and its Cauchari brine project from rival SQM.However, it is the producer’s consumer-side activity in the build-up to its IPO that has surprised many participants and ensured lithium’s medium-to-long-term demand outlook continues to strengthen.",{"type":577,"attrs":619,"content":620},{"textAlign":49},[621],{"text":622,"type":582},"Lithium hydroxide and lithium carbonate supply deals with LG Chem, Tesla, and BMW have set the tone for a new era of major long-term supply deals that are in the tens of thousands of tonnes a year. Ganfeng’s deal with LG Chem was the most significant in terms of volumes. Having firstly agreed a 47,600-tonne lithium hydroxide deal covering a four-year period between 2019 and 2022. The producer then extended this deal by 45,000 tonnes of lithium hydroxide and carbonate between 2019 and 2025 to a total contracted size of 92,600 tonnes.",{"type":577,"attrs":624,"content":625},{"textAlign":49},[626],{"text":627,"type":582},"A deal of this significance cannot be underestimated.",{"type":577,"attrs":629,"content":630},{"textAlign":49},[631],{"text":632,"type":582},"Only a few years ago in 2015, the lithium hydroxide market was 40,000 tonnes and has grown to a forecasted 75,000 tonnes in size this year. The LG Chem deal, with one customer alone, exceeds this.",{"type":577,"attrs":634,"content":635},{"textAlign":49},[636,638],{"text":637,"type":582},"Benchmark Minerals",{"text":639,"type":582}," expects this supply to provide at least 40% of LG Chem’s lithium hydroxide needs between 2019 and 2022 as it ramps up from 29.5GWh in 2018 to an estimated 80GWh in 2022. Should LG Chem be operating at 80GWh by 2022, it will require 61,600 tonnes of lithium hydroxide for that year. LG Chem have emerged in 2018 as being the most aggressive battery maker, overtaking the much talked about Chinese producer, CATL which also underwent its own IPO in June 2018.",{"type":577,"attrs":641,"content":642},{"textAlign":49},[643,645,647],{"text":644,"type":582},"While CATL grabbed headlines in 2017 with plans to produce 100GWh of NCM cells by 2025, it later scaled this back to 50GWh capacity. LG Chem on the other hand have ramped up their plans in the last 12 months and subtly increased their capacity expansions, plant by plant, to a cumulative 100GWh of capacity by 2023, according to ",{"text":646,"type":582},"Benchmark Mineral Intelligence",{"text":648,"type":582}," data from its Battery Megafactories subscription service.",{"type":577,"attrs":650,"content":651},{"textAlign":49},[652,654,656],{"text":653,"type":582},"Soon after this development, Ganfeng made public a new deal with Tesla for “20% of its supply” in a deal that ",{"text":655,"type":582},"Benchmark",{"text":657,"type":582}," estimates will equate to 14,000 tonnes to 18,000 tonnes a year between January 2018 and December 2020.",{"type":659,"attrs":660,"content":662},"heading",{"level":661,"textAlign":49},6,[663],{"text":664,"type":582},"Tesla’s shift in strategy",{"type":577,"attrs":666,"content":667},{"textAlign":49},[668],{"text":669,"type":582},"For Tesla, it marks a shift in raw material supply chain strategy as it now appears willing to strike large, long term lithium supply deals when in the past it was reliant on smaller volume contracts to top up what partner, Panasonic, had locked up in contracts.",{"type":577,"attrs":671,"content":672},{"textAlign":49},[673],{"text":674,"type":582},"The only previous public deals for Tesla were with lithium development stage companies, Kidman Resources, Pure Energy Minerals and Bacanora Minerals each of which would have not yielded any near-term lithium supply.",{"type":577,"attrs":676,"content":677},{"textAlign":49},[678,680,688],{"text":679,"type":582},"Concerns will have been raised with Kidman’s deal after fresh doubt was cast on the developer that is hoping the build Western Australia’s next spodumene mine (see ",{"text":681,"type":582,"marks":682},"SQM hits more obstacles on path to lithium expansions",[683],{"type":684,"attrs":685},"link",{"href":686,"uuid":49,"anchor":49,"target":49,"linktype":687},"https://source.benchmarkminerals.com/article/sqm-hits-more-obstacles-on-path-to-lithium-expansions","url",{"text":689,"type":582},")",{"type":577,"attrs":691,"content":692},{"textAlign":49},[693],{"text":694,"type":582},"The Mount Holland project is part of an alliance with Chile’s SQM which has already agreed to invest $110m to develop the mine.",{"type":577,"attrs":696,"content":697},{"textAlign":49},[698],{"text":699,"type":582},"For Tesla, the deal making is set to continue as the Gigafactory ramps up to 35GWh next year and its lithium hydroxide needs will rise to 25,000 tpa. The Gigafactory success will make Tesla the owner of the world’s biggest battery producer come the end of 2019 and the third largest producer behind LG Chem and Panasonic. It will also become the world’s biggest consumer of lithium ion batteries in 2019 relying on 11.5GWh from Panasonic’s Suminoe plant in Japan producing 18650 NCA cells for the Model X and Model S and at least 30GWh of 2170 NCA cells with are all destined for Model 3.",{"type":577,"attrs":701,"content":702},{"textAlign":49},[703],{"text":704,"type":582},"It has to be noted that the Gigafactory’s resounding success in ramping up battery cell production capacity is in large thanks to Panasonic, which is not only a part owner of the battery megafactory but also operates the cell manufacturing portion of the plant.",{"type":577,"attrs":706,"content":707},{"textAlign":49},[708],{"text":709,"type":582},"As the Benchmark Quarterly Review was going to press, yet another major deal was announced: Ganfeng’s five-year supply deal with BMW. While few public details emerged, Henry Sanderson from the Financial Times reported that Ganfeng Lithium can supply “as much lithium as Munich-based BMW needs”.",{"type":577,"attrs":711,"content":712},{"textAlign":49},[713],{"text":714,"type":582},"Considering BMW signed a major partnership with Chinese battery producer CATL earlier in the year, it is a fair assumption that this lithium deal ties Ganfeng in to CATL’s supply chain and with it the world’s top three lithium ion battery producers for the next 3 to 5 years.",{"type":659,"attrs":716,"content":717},{"level":661,"textAlign":49},[718],{"text":719,"type":582},"Disconnection",{"type":577,"attrs":721,"content":722},{"textAlign":49},[723,725,727],{"text":724,"type":582},"Despite the flurry of major news in the past few months, the lithium industry has been suffering from negative sentiment both within China and the investment spaces. Speaking with market participants and institutional investors around the world, it has been quite interesting for ",{"text":726,"type":582},"Benchmark ",{"text":728,"type":582},"to see the disconnection between the actual lithium market and the investment space.",{"type":577,"attrs":730,"content":731},{"textAlign":49},[732],{"text":733,"type":582},"Short term investor sentiment has been hovering over lithium in 2018, which Lachlan Shaw, Head of Commodities Strategy at UBS, described on the Benchmark World Tour as a “lithium air pocket”. It was an apt phrase used to describe the 51% fall in price of Benchmark Minerals China EXW Lithium Carbonate, Technical Grade since May which is at odds with the price performance of other rest of the world grades and lithium’s medium-term prospects.",{"type":577,"attrs":735,"content":736},{"textAlign":49},[737],{"text":738,"type":582},"This air pocket and price fall was sparked by new lithium carbonate supplies from Qinghai in H1 2018 while Chinese EV and battery demand lagged. Qinghai, China’s only lithium brine producing area, has increased its output by almost double from 15,000 tpa in 2017 to an expected 25-30,000 tpa by the end of 2018. While quality remains a major issue for the region, the lithium carbonate – much of which is lower quality than technical grade – is being purchased and upgraded for other lithium markets outside of batteries. Some of this new supply is also being converted into lithium hydroxide within China.",{"type":577,"attrs":740,"content":741},{"textAlign":49},[742],{"text":743,"type":582},"All in all, these factors have conspired to push down the technical grade lithium price which has spilled over to the battery grade lithium price, despite the majority of Qinghai’s material not being used in battery production. Sentiment within China has been negative for lithium for some time.",{"type":577,"attrs":745,"content":746},{"textAlign":49},[747],{"text":748,"type":582},"Many consumers of lithium chemicals have felt that the producers – which are primarily converters of spodumene from Australia – have been making significant profits at the expense of the downstream. Lithium hydroxide prices within China have been north of $20/kg since January 2017 – something which has left a bitter taste with end users. What has left the world’s lithium industry perplexed is the outside view that this unique situation in China is symptomatic of the whole industry. This is not the case. Benchmark Minerals prices are presently at $14,500/tonne for lithium carbonate (FOB S. America) and $17,000/tonne for lithium hydroxide (FOB N. America)",{"type":577,"attrs":750,"content":751},{"textAlign":49},[752,754,756],{"text":753,"type":582},"Another factor that has added to the air of lithium negativity is the fear of oversupply. For at least a year and a half now, the investment community has feared a “flood of lithium” entering the market through new spodumene mines opening in Australia feeding into ever increasing conversion capacity in China. ",{"text":755,"type":582},"Benchmark Minerals ",{"text":757,"type":582},"outlined its views towards this in its Lithium Research Notes in January and June (These are available through Benchmark’s Lithium Price Assessments Subscription).",{"type":577,"attrs":759,"content":760},{"textAlign":49},[761],{"text":762,"type":582},"Yet fear has not left the investment space, despite lithium’s medium- and long-term demand prospects increasing during this time and with lithium demand growing over 20% a year. In the middle of last year, lithium began to garner interest from short-term speculators. “SQM’s share price is down roughly 30% year to date. This is a company that is one of the largest lithium producers in the world, with demand increasing at 20% per year,” lithium investment expert, Chris Berry of House Mountain Partners told Benchmark Quarterly Review. “SQM has unique pricing power due to its production history and is also expanding production capacity at by far the lowest capital intensity in the world. It seems that the share price performance and the company’s ability to execute are disconnected.”",{"type":577,"attrs":764,"content":765},{"textAlign":49},[766],{"text":767,"type":582},"In another example of this disconnection, Berry explained the stock performance of Australia’s Pilbara Minerals. “This is a company in the early stages of ramping lithium concentrate production, fully funded, with world class off take partners in place and aggressive expansion plans. The company has executed its plans really well thus far and yet the share price tells a different story. Perhaps the shares are finding a new base and, to paraphrase Winston Churchill, ‘we are at the end of the beginning’ of lithium’s run,” Berry added.",{"type":577,"attrs":769,"content":770},{"textAlign":49},[771],{"text":772,"type":582},"Poorly researched, ill-conceived and irresponsible reports have not helped the cause of investors in the lithium space. This is why share prices are a far cry from the real lithium industry state of play. Yet it is this environment that welcome’s lithium’s Era of the IPO.","Investment sentiment surrounding the lithium industry entering into Q4 has started to turn negative at a time when the industry enters what Benchmark Mineral Intelligence has termed the Era of the IPO. The lithium industry’s leading producers – Ganfeng Lithium, Tianqi Lithium, and FMC Lithium (soon to be rebranded Livent) – are on the verge […]",[775],{"slug":565,"name":566,"content":776},{"job_title":568,"image":777,"bio":571,"linkedin":572},{"filename":570},"\u003C!--#storyblok#{\"name\": \"article\", \"space\": \"\", \"uid\": \"2239049a-bbe0-4362-be39-102be66f4c78\", \"id\": \"\"}-->","article",[781,784,787],{"slug":782,"name":783},"batteries","Batteries",{"slug":785,"name":786},"critical-minerals","Critical Minerals",{"slug":788,"name":8},"lithium","private",{"id":49,"alt":791,"name":791,"focus":791,"title":791,"source":791,"filename":792,"copyright":791,"fieldtype":793,"meta_data":794,"is_external_url":51},"","https://a.storyblok.com/f/287943243085208/700def4e85/bm-dsc-0211.jpg","asset",{"alt":791,"title":791,"source":791,"copyright":791},"Oct 16, 2018","16th October 2018",[],[],1792773943856]