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in 2019","lithium-in-2019","article/lithium-in-2019",{"_uid":557,"date":558,"tags":559,"editor":560,"content":570,"excerpt":904,"featured":50,"reporter":905,"_editable":909,"component":910,"seo_title":553,"categories":911,"visibility":920,"author_company":49,"featured_image":921,"seo_description":904,"author_full_name":49,"author_job_title":49,"formattedDate":926,"formattedArticleDate":927},"3fbf8299-f27a-4ab4-85e9-7ffb2be648e8","2019-01-28 00:00",[],[561],{"slug":562,"name":563,"content":564},"matthew-bird","Matthew Bird",{"job_title":565,"image":566,"bio":568,"linkedin":569},"Senior Editor - Supply Chains & Data Visualisation",{"filename":567},"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":571,"content":572},"doc",[573,580,585,590,597,604,609,616,621,626,635,640,645,650,655,660,665,670,677,682,687,692,697,702,707,712,719,728,733,738,743,748,753,758,763,768,773,778,783,791,796,805,810,821,830,839,844,849,854,859,864,869,873,880,889,894,899],{"type":574,"attrs":575,"content":576},"paragraph",{"textAlign":49},[577],{"text":578,"type":579},"2018 WAS A TURBULENT YEAR FOR THE LITHIUM INDUSTRY, WHICH WAS DEFINED BY FALLING CHINESE LITHIUM CARBONATE PRICES AND A SUBSEQUENT SOFTENING FROM THE Q1 HIGHS FOR REST OF THE WORLD (ROW) PRICES.","text",{"type":574,"attrs":581,"content":582},{"textAlign":49},[583],{"text":584,"type":579},"IT WAS A YEAR WHERE LITHIUM HYDROXIDE WAS PUT FIRMLY ON THE AGENDA OF LITHIUM MAJORS, AND CATHODE CONSUMERS BEGAN TO RECEIVE FIRM SIGNALS FROM BATTERY MAKERS FOR THEIR CHOICE OF CATHODE MATERIALS FOR THE EV REVOLUTION.",{"type":574,"attrs":586,"content":587},{"textAlign":49},[588],{"text":589,"type":579},"AS THE INDUSTRY CONTINUES ON THE PATH TOWARDS A SURGE IN BATTERY DEMAND, HERE BENCHMARK SUMMARISES THE LITHIUM TRENDS TO LOOK OUT FOR IN 2019.",{"type":591,"attrs":592,"content":594},"heading",{"level":593,"textAlign":49},3,[595],{"text":596,"type":579},"1. Spodumene price declines",{"type":574,"attrs":598,"content":599},{"textAlign":49},[600,602],{"text":601,"type":579},"The feedstock contraints which prompted the lithium price spike back in 2015 have been addressed primarily by new spodumene operations. The Mt Marion project in Kalgoorlie, Western Australia, which Ganfeng has a life-of-mine offtake agreement in place with Neometals, and Galaxy Resources’ Mt Cattlin mine, which has a full offtake agreement in place, led the way for a new generation of producers in 2017. These projects have now been followed into production by another four operations in 2018 which promise to bring significant new volumes into the market throughout 2019.",{"text":603,"type":579},"An important question for the industry is how this will impact spodumene prices, which have remained at high levels over the past 12 months due to limited availability outside offtake agreements.",{"type":574,"attrs":605,"content":606},{"textAlign":49},[607],{"text":608,"type":579},"New spodumene concentrate coming on stream in Australia will increase stocks at the first step in the lithium-to-electric-vehicle supply chain. With Altura Mining, AMG NV and Pilbara Minerals adding to the new supply from Allied Mineral Assets, which began production in Q2 2018, Chinese converters have been pushing for lower priced concentrate.",{"type":574,"attrs":610,"content":611},{"textAlign":49},[612,614],{"text":613,"type":579},"Benchmark Mineral Intelligence",{"text":615,"type":579},"’s expectation is that the price will settle between $700-750/tonne in H2 2019, having fluctuated between $870-915/tonne during 2018.",{"type":574,"attrs":617,"content":618},{"textAlign":49},[619],{"text":620,"type":579},"This new material will be controlled by a small group of Chinese converters. However, the question remains whether they have the capacity to convert. The offtake agreements for new suppliers (Pilbara, Altura, AMG) are largely tied to the function of the chemical price – as these chemical prices soften, so too will the spodumene price.",{"type":591,"attrs":622,"content":623},{"level":593,"textAlign":49},[624],{"text":625,"type":579},"2. Conversion bottleneck",{"type":574,"attrs":627,"content":628},{"textAlign":49},[629,631,633],{"text":630,"type":579},"While it is likely that spodumene stocks will increase, this does not necessarily translate to an oversupply of lithium chemicals, especially battery grade material.",{"text":632,"type":579},"Benchmark ",{"text":634,"type":579},"does not expect there to be enough conversion capacity for all of the spodumene supply coming into the market from Australia (Allied Mineral Assets, Altura, Pilbara) and Brazil (AMG).",{"type":574,"attrs":636,"content":637},{"textAlign":49},[638],{"text":639,"type":579},"Therefore, while lithium chemical prices are expected to continue to soften from their Q1 2018 highs (particularly for lithium hydroxide), the fall off will be less extreme than seen in the Chinese domestic lithium carbonate market in 2018.",{"type":574,"attrs":641,"content":642},{"textAlign":49},[643],{"text":644,"type":579},"Cheaper spodumene feedstock may allow for some more reductions in carbonate pricing and an adjustment in hydroxide prices is inevitable in the medium-term, however, prices will still remain far above 2015 levels.",{"type":574,"attrs":646,"content":647},{"textAlign":49},[648],{"text":649,"type":579},"A limited number of offtakers control all of the new spodumene supplies and these converters are unlikely to have sufficient conversion capacity to ensure full spodumene utilisation in 2019.",{"type":574,"attrs":651,"content":652},{"textAlign":49},[653],{"text":654,"type":579},"Ganfeng Lithium were the only tier 1 producer to add capacity in 2018 and Tianqi is not expecting a new Western Australian plant until late-2019. Tier 2 producers are still vague on their timelines for new plants in 2019, with the exception of Yahua which is targeting H1 commissioning.",{"type":574,"attrs":656,"content":657},{"textAlign":49},[658],{"text":659,"type":579},"Emphasis has come out of lithium expansions in China due to the 2018 price which has seen narrowing margins. There were fewer new capacity announcements in 2018 and many previous commitments look likely to never materialise.",{"type":574,"attrs":661,"content":662},{"textAlign":49},[663],{"text":664,"type":579},"Battery-grade production remains an obstacle for all converters – although battery-grade specification can be reached, it often involves increased cost or only makes a proportion of total output.",{"type":591,"attrs":666,"content":667},{"level":593,"textAlign":49},[668],{"text":669,"type":579},"3. The industry will begin to remember lithium carbonate",{"type":574,"attrs":671,"content":672},{"textAlign":49},[673,675],{"text":674,"type":579},"The shift towards high-nickel, lithium hydroxide containing cathode chemistries which gathered pace in 2018, showed signs of slowing towards the end of the year, raising questions about the future balance between carbonate and hydroxide demand.",{"text":676,"type":579},"With the dramatic decreases in prices of lithium carbonate and cobalt, the emphasis of moving towards NCM 811 or NCA cathode chemistries has softened which will bring lithium carbonate back in the spotlight in 2019.",{"type":574,"attrs":678,"content":679},{"textAlign":49},[680],{"text":681,"type":579},"In addition, the adjustment of China’s automobile industry investment regulations in December 2018 signalled a relaxation in the country’s push towards higher energy-density and if reflected in 2019 EV subsidies it could have big implications for the direction of demand in the year ahead.",{"type":574,"attrs":683,"content":684},{"textAlign":49},[685],{"text":686,"type":579},"Carbonate price declines vs stable hydroxide prices mean many Chinese producers are questioning whether the 811 push is necessary.",{"type":574,"attrs":688,"content":689},{"textAlign":49},[690],{"text":691,"type":579},"Technical challenges with 811 mean 622 provides a simple transition. It’s also worth noting that Japanese and Korean majors remain the only companies able to use 811 for EVs. As this is where the growth is centred, cathode producers may need to target 622 improvements to remain competitive.",{"type":574,"attrs":693,"content":694},{"textAlign":49},[695],{"text":696,"type":579},"Hydroxide prices are likely to decrease towards carbonate levels but tighter market conditions mean battery-grade supply availability will be limited in the medium-term.",{"type":591,"attrs":698,"content":699},{"level":593,"textAlign":49},[700],{"text":701,"type":579},"4. Battery raw material contracts – just the start",{"type":574,"attrs":703,"content":704},{"textAlign":49},[705],{"text":706,"type":579},"With the impending surge in battery megafactory production fast approaching, downstream players are showing increased appetite for offtakes and JVs that will provide the foundation for their future production.",{"type":574,"attrs":708,"content":709},{"textAlign":49},[710],{"text":711,"type":579},"Lithium converters through to EV producers all showed increased intent when it came to locking in supply chain relationships in 2018 and this is a trend we expect to continue and accelerate in 2019 as the battery market prepares for a 2021 tipping point in production levels",{"type":574,"attrs":713,"content":714},{"textAlign":49},[715,717],{"text":716,"type":579},"In 2018 we saw Tesla, BMW and LG Chem tie themselves to Ganfeng and other junior offtakes. In 2019 the industry can expect more agreements, which are likely needed to meet",{"text":718,"type":579},"the battery production spike.",{"type":574,"attrs":720,"content":721},{"textAlign":49},[722,724,726],{"text":723,"type":579},"Negative investor sentiment has made attracting capital difficult – there is recognition from downstream that help is needed to progress new projects to production. Speaking at ",{"text":725,"type":579},"Benchmark Minerals Week ",{"text":727,"type":579},"in October 2018, Anthony Tse, Galaxy Resources’ Managing Director and Chief Executive Officer, spelled out the capital raising issues facing the lithium industry today:",{"type":574,"attrs":729,"content":730},{"textAlign":49},[731],{"text":732,"type":579},"“One of the most important things people don’t talk about enough is the availability of capital. In order to bring online somewhere between 600-800,000 tonnes of LCE supply at an average capital intensity of, say, $15k per tonne for a greenfield project – and this is a brine project which has a much lower capital intensity than a hard rock and a converter combined – you’re looking somewhere in the region of $9-12 billion of capital required.”",{"type":574,"attrs":734,"content":735},{"textAlign":49},[736],{"text":737,"type":579},"He continued, “the main challenge that we see is that within the industry over the past couple of years – if we include all the greenfield and all the brownfield capital raisings that have been done in the industry sector for shovel ready projects we max out at slightly over $3billion of capital that’s actually been raised. So, the sector’s only been raising money at the rate of about $1.5billion a year. And yet it still needs to pull in probably, if we take off the $3 billion from the $9-12 billion, we still need to raise another $6-9 billion between now and 2025.”",{"type":574,"attrs":739,"content":740},{"textAlign":49},[741],{"text":742,"type":579},"The gatekeepers to lithium resources will make downstream companies uneasy about access to raw materials. Currently only a few companies dominate the lithium feedstock supply chain and downstream players are seeking to address supply risks.",{"type":574,"attrs":744,"content":745},{"textAlign":49},[746],{"text":747,"type":579},"2019 is set to be a year of transition and one where the downstream players lay foundations without massive demand growth. An increase in new resources will help the supply chain to evolve in order to be more responsive to downstream needs.",{"type":574,"attrs":749,"content":750},{"textAlign":49},[751],{"text":752,"type":579},"In the coming year, we expect downstream companies to source material from more sources so they can have greater diversity of supply and it is likely that JVs and partnerships will ease this process.",{"type":591,"attrs":754,"content":755},{"level":593,"textAlign":49},[756],{"text":757,"type":579},"5. Majors to continue entry into lithium assets",{"type":574,"attrs":759,"content":760},{"textAlign":49},[761],{"text":762,"type":579},"While the downturn in lithium equity markets has slowed the progress",{"type":574,"attrs":764,"content":765},{"textAlign":49},[766],{"text":767,"type":579},"of many developers, there is an acceptance from the industry’s established producers that there is still a long road ahead to meeting the demand projections for 2021, let alone 2025.",{"type":574,"attrs":769,"content":770},{"textAlign":49},[771],{"text":772,"type":579},"Difficulty meeting even preliminary expansions targets for many, means industry majors will continue to commit to new resources and conversion facilities to ensure their place as market leaders.",{"type":574,"attrs":774,"content":775},{"textAlign":49},[776],{"text":777,"type":579},"This is likely to see more partnerships between development stage companies and industry majors as they look to lock in leading assets, particularly if equity market pressures allow for more favourable valuations.",{"type":574,"attrs":779,"content":780},{"textAlign":49},[781],{"text":782,"type":579},"Ganfeng Lithium and Albemarle both made significant investments in new resources in 2018. These moves are not isolated and during 2019 other major players in the lithium industry are likely to follow.",{"type":574,"attrs":784,"content":785},{"textAlign":49},[786,788,789],{"text":787,"type":579},"In his presentation at ",{"text":725,"type":579},{"text":790,"type":579},"Eric Norris, President of Albemarle’s Lithium business unit, gave his thoughts on securing lithium supply: “given the growth curve that the EV supply chain is expecting, what we’re tending to see is partnerships being developed. We’re now striking long-term contracts for that reason. When you think through the risk factors they [OEMs] have, they have to really think about where they get their supply from and it’s not just the proven supplier who has the resources to invest…it’s the one who can make the product consistently that’s not going to cause failure.”",{"type":574,"attrs":792,"content":793},{"textAlign":49},[794],{"text":795,"type":579},"Industry majors are likely to look at new agreements to secure post-2021 expansions. Geopolitical risks could mean that we see an ongoing push from majors for new resources outside of China and Chile. Pressure from equity markets on valuations may also create opportunities for majors to make investments in development stage assets.",{"type":591,"attrs":797,"content":798},{"level":593,"textAlign":49},[799,801,803],{"text":800,"type":579},"6. Are big oil, auto & energy ",{"text":802,"type":579},"the next major investors for ",{"text":804,"type":579},"lithium?",{"type":574,"attrs":806,"content":807},{"textAlign":49},[808],{"text":809,"type":579},"Lithium is entering its fourth year in what is widely expected to be a ten-year investment cycle to create an electric vehicle (EV) blueprint for the 21st century.",{"type":574,"attrs":811,"content":812},{"textAlign":49},[813,815,817,819],{"text":814,"type":579},"Major investment to date has come from inside the lithium industry and professional investors, but we are now at a point where new players from the oil, energy and auto industries will begin to take action. In 2018 we started",{"text":816,"type":579},"to see interest from these companies, for instance BP acknowledged the relevance of raw materials in electric cars in its statistical review, quoting ",{"text":818,"type":579},"Benchmark",{"text":820,"type":579},"’s lithium prices.",{"type":574,"attrs":822,"content":823},{"textAlign":49},[824,826,828],{"text":825,"type":579},"In November 2014 and December 2015, ",{"text":827,"type":579},"Benchmark Mineral Intelligence ",{"text":829,"type":579},"published these simple charts, right, to highlight the beginning of a mega-trend.",{"type":574,"attrs":831,"content":832},{"textAlign":49},[833,835,837],{"text":834,"type":579},"Presented in private meetings and on the ",{"text":836,"type":579},"Benchmark World Tour",{"text":838,"type":579},", it was the first time lithium and lithium ion batteries were discussed as the lynchpin that holds together the futures for three multi-trillion dollar industries: oil, energy/utilities and auto.",{"type":574,"attrs":840,"content":841},{"textAlign":49},[842],{"text":843,"type":579},"It has taken four years to reach a point where EV demand is not only getting stronger but energy storage potential has also become a reality.",{"type":574,"attrs":845,"content":846},{"textAlign":49},[847],{"text":848,"type":579},"With concrete demand numbers and enough confidence in battery producers’ and auto makers’ timelines, the lithium story has gathered pace and reached a new phase in its development to become a mainstream speciality chemical.",{"type":574,"attrs":850,"content":851},{"textAlign":49},[852],{"text":853,"type":579},"The lithium story is now accepted by all sectors, investors and commentators alike with the discussion focusing on the rate of growth rather and how big the industry could become by 2030.",{"type":574,"attrs":855,"content":856},{"textAlign":49},[857],{"text":858,"type":579},"While 2030 may seem like long-term, if you are an oil producer, auto maker or in the utilities business, this falls within the short-to-medium term category. And while major actors in these industries have been circling for some time, 2019 could well be the year where big decisions are made.",{"type":574,"attrs":860,"content":861},{"textAlign":49},[862],{"text":863,"type":579},"Internal lithium M&A to continue, lower asset valuations to drive deal-making",{"type":574,"attrs":865,"content":866},{"textAlign":49},[867],{"text":868,"type":579},"You can also still expect M&A activity from within the lithium space and with it high profile successes and failures that come with the territory and risk of building the lithium supply chain at a pace that has never been experienced before.",{"type":574,"attrs":870,"content":871},{"textAlign":49},[872],{"text":772,"type":579},{"type":574,"attrs":874,"content":875},{"textAlign":49},[876,878],{"text":877,"type":579},"This is likely to see more partnerships between development stage lithium companies and major lithium producers as they look to",{"text":879,"type":579},"lock in leading assets, particularly if even bigger outsiders from the oil, auto or energy industries are circling and with equity market pressures allowing for more favourable valuations.",{"type":574,"attrs":881,"content":882},{"textAlign":49},[883,885,887],{"text":884,"type":579},"It is ",{"text":886,"type":579},"Benchmark Mineral Intelligence’s ",{"text":888,"type":579},"belief that 2015-2018 was phase one in building a lithium-to-EV supply chain for the 21st century.",{"type":574,"attrs":890,"content":891},{"textAlign":49},[892],{"text":893,"type":579},"This was a period where junior or development stage lithium companies and Tesla had believed big and convinced the bigger chemical producers and auto makers that the EV story was real and happening faster than expected.",{"type":574,"attrs":895,"content":896},{"textAlign":49},[897],{"text":898,"type":579},"The dream became a bigger reality than foreseen and the lithium industry has since proven its ability to react in the short term. It has also proven that it could handle a jump in the compound annual growth trajectory from 6-8% a year in a pre-2014 world to 22-26% a year in a post-2016 world.",{"type":574,"attrs":900,"content":901},{"textAlign":49},[902],{"text":903,"type":579},"We are now in phase two of lithium’s journey from niche to mainstream where the big fish are no longer SQM, Ganfeng Lithium, Albemarle and Tianqi, but Shell, BP, Saudi Aramco, VW, Toyota and General Motors.","2018 WAS A TURBULENT YEAR FOR THE LITHIUM INDUSTRY, WHICH WAS DEFINED BY FALLING CHINESE LITHIUM CARBONATE PRICES AND A SUBSEQUENT SOFTENING FROM THE Q1 HIGHS FOR REST OF THE WORLD (ROW) PRICES. IT WAS A YEAR WHERE LITHIUM HYDROXIDE WAS PUT FIRMLY ON THE AGENDA OF LITHIUM MAJORS, AND CATHODE CONSUMERS BEGAN TO RECEIVE […]",[906],{"slug":562,"name":563,"content":907},{"job_title":565,"image":908,"bio":568,"linkedin":569},{"filename":567},"\u003C!--#storyblok#{\"name\": \"article\", \"space\": \"\", \"uid\": \"3fbf8299-f27a-4ab4-85e9-7ffb2be648e8\", \"id\": \"\"}-->","article",[912,915,918],{"slug":913,"name":914},"batteries","Batteries",{"slug":916,"name":917},"critical-minerals","Critical Minerals",{"slug":919,"name":8},"lithium","private",{"id":49,"alt":922,"name":922,"focus":922,"title":922,"source":922,"filename":923,"copyright":922,"fieldtype":924,"meta_data":925,"is_external_url":51},"","https://a.storyblok.com/f/287943243085208/93f8799805/bm-sqm-personnel.jpg","asset",{"alt":922,"title":922,"source":922,"copyright":922},"Jan 28, 2019","28th January 2019",[],[],1792773943551]