lithium market overview -...

Lithium Market Overview December 2015

John Meyer Sergey Raevskiy Carole Ferguson Simon Beardsmore

Lithium Market Review December 2015

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Table of Contents

Lithium Market Review 3

Introduction 3 Pricing 3 Demand 4 Resources/Reserves 7 Production 7 Processing 9

Appendix I 10

New Developments in the Li-Ion Trechnology 10

Appendix II 12

Competition between Different battery Systems 12

DISCLAIMER: Investment Research 13


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Lithium Market Review

Introduction Lithium is the lightest metal, has strong electrochemical potential and is highly reactive

element making it flammable and potentially explosive when exposed to air and water. The

metal does not occur in elemental form due its high reactivity and found in lithium

containing minerals in hard rock deposits, lithium rich clays and brine flats.

Pricing There are no exchange-based prices for lithium with buy/sell contracts negotiated between

suppliers/consumers/traders directly.

Generally, lithium carbonate (18.8% Li) is the most marketed (the next most traded

compound is 16.5% Li lithium hydroxide) lithium containing product and, hence, is useful in

gauging the state of the lithium market. Prices have been through a soft patch in 2008/09

on the back of a global financial crisis with a major producer (SQM) responding with a 20%

reduction in offer prices which kept prices subdued in 2010-11. Market conditions have

been improving since then with prices returning on a rising trend. Carbonate prices are

reported to have averaged US$5,700/t LCE in the first nine months of the year (SQM).

Hydroxide prices have hit record high in Q2/15 on the back of solid demand from greases

and lubricants manufacturers and growing consumption from EV/PHEV producers.

Lithium carbonate price series ($/t LCE) Lithium carbonate price series ($/t LCE)

Source: Global Lithium (2015)


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Demand Two separate markets for lithium currently exist including chemical and technical products.

Lithium use in primary (non-rechargeable) and secondary (re-chargeable) batteries in

production of cathodes and lithium-containing electrolytes is well known accounting for

nearly a third of global demand and is the major user of lithium chemicals. Additional lithium

chemicals applications include greases (as a thickening agent in auto and industrial

lubricants), air-conditioning units (industrial refrigeration, humidity control and drying

systems), aluminium production, pharmaceuticals, polymers and cements. The lithium

technical market includes uses in glass and ceramics (reduces melting point, viscosity and

thermal expansion improving durability), and metallurgical industries (used a scavenger or

remover of impurities).

In terms of the product breakdown, lithium carbonate (Li2CO3, 18.8% Li) accounts for c.48%

of world lithium containing products (25% technical-grade and 23% battery-grade), lithium

hydroxide monohydrate (LiOH.H2O, 16.5% Li) accounts for 16% with the balance used in

the form of lithium bromide (LiBr, 8.0% Li), lithium chloride (LiCl, 16.3% Li) and lithium

minerals.

Lithium products and their uses (underlined items are feedstock for technical markets; bold – batteries; bold and underlined – both)

Source: FMC, Roskill

Lithium demand breakdown

Source: USGS


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Amid wide consumer and industrial applications of lithium, its use in rechargeable batteries

is undoubtedly a major driver of future demand growth. Thanks to its high energy density,

lithium-ion batteries may be found in application where size and weight is a constraint

which is why they are so popular in portable electronic devices. Lithium-ion batteries have

minimal memory effect (capacity of the battery drops if it is recharged before being fully

depleted) and show high charge discharge rates making it useful in mobility applications for

acceleration in vehicles using electric motors (e-bikes, EVs, HEVs, PHEVs and others).

Highlighted advantages of Li-ion systems have driven their share in total usage of

rechargeable batteries worldwide from non-existent in 1991 to more than 80% by the end

of 2000s.

The breakdown of rechargeable batteries sales by system used, %

Source: FMC, Roskill

It should be noted that it is lithium hydroxide among other lithium products that is likely to

see a material increase in demand driven by growing sales of electric/hybrid motors vehicles

and electric storage systems (see different cathode and respective lithium product used in

various battery systems below).

Battery Use Lithium raw material used

LCO (Lithium Cobalt Oxide) Small portable devices Lithium carbonate

NCA (Lithium Nickel Cobalt Aluminium Oxide) Tesla S (EV), Toyota Prius (PHEV) Lithium hydroxide

NMC (Lithium Nickel Manganese Cobalt Oxide) GM Volt (PHEV), Nissan Leaf (EV) Lithium hydroxide

LFP (Lithium Iron Phosphate) Electric buses, ESS (Electric Storage Systems) Lithium hydroxide

LMO (Lithium Manganese Oxide) GM Volt (PHEV), Nissan Leaf (EV), BMW i3 (EV) Lithium carbonate

Source: Nemaska Lithium

At the moment, battery demand accounts for c.30% of lithium hydroxide consumption with

other 65% used in greases and lubricants, markets which are expected to grow at world

GDP rate.

Annual lithium demand currently runs at around 160ktpa LCE (30kt Li) marking a 6.8%pa

CAGR from the beginning of 2000s on Roskill estimates. Market estimates are for an

aggressive expansion in demand primarily led by lithium-ion batteries sector on the back of

increasing penetration levels of EVs and hybrids in the auto market. In particular, Roskill

expects demand to hit 290kt LCE in 2020 with a potential upside of growing up to 420kt LCE

under “optimistic” scenario which would imply c. 10% and 17% CAGRs, respectively.

Rockwood Lithium, a subsidiary of Albemarle, estimates lithium demand to hit 250kt LCE in

2020 based on “low” growth forecasts in the automotive sector and c.320kt LCE in the

“high” case scenario implying 8% and 12% CAGRs.


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Lithium demand growth forecasts (t LCE) Li-ion batteries related demand growth rates forecast

Source: Albemarle, Signumbox (2015)

Admittedly, the number of EVs on the roads is set to increase moving forwards with more

models to choose from and falling price per vehicle led by developments in battery

technology. Latest estimates showed battery pack costs (which account for 15-20% of the

EV cost) have been going down by c.14%pa between 2007 and 2014 from US$1,000/kWh

to US$410/kWh. Forecasts are for costs to continue the downtrend towards the

US$150/kWh threshold where EVs are believed to be price-competitive with internal

combustion engines. Among other things, the progress of EV penetration levels will also

depend on the price of hydrocarbons with a recent decline in gas prices cutting the

equivalent mpg of comparable EVs.


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Resources/Reserves The composition of estimated mineral reserves of contained lithium show 87% of the metal

is hosted by brine deposits with the balance attributed to hard rock deposits mainly from

pegmatites, but also from petalite and lepidolite (USGS, 2009).

World lithium mineral reserves (13,500kt Li as of 2014) World lithium mineral resources (40,000kt Li of 2014)

Source: USGS

Production In terms of annual production, market estimates are for global lithium output at 160kt LCE

(30kt Li) in 2014 with roughly a 40:60 split between lithium minerals and brine operations.

Mined lithium production (in LCE, 2014)

Source: Albemarle

Similar to global lithium mineral resources, production is concentrated both geographically

and corporate-wise. Australia (Albemarle/Tianqi), Chile (SQM, Albemarle), China and

Argentina (FMC) accounted for 94% of total world production in 2014.


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World lithium production (36kt Li as of 2014) World lithium producers (2014)

Source: USGS, Albemarle

Brine lake deposits account for the most of global lithium mineral reserves with salt lakes in

South America (Argentina, Bolivia and Chile) or the so-called “lithium triangle” is estimated

to host c.75% of world resources. Additionally, lithium from brines is sourced from China

and the US (Nevada). In Chile, the Salar de Atacama is the major source of the metal holding

around 30% of the worlds know lithium resources and being operated by Sociedad Quimica

y Minera de Chile S.A (SQM) and Rockwood Lithium, a subsidiary of a global chemicals

manufacturer Albemarle. In Argentina, FMC is operating the Salar del Hombre Muerto brine

deposit. In Bolivia, the government is looking at developing a 9mt in lithium reserves Salar

de Uyuni brine deposit for production of lithium carbonate. In China, lithium carbonate,

lithium chloride and lithium hydroxide are produced from local brines as well as from

domestic and imported spodumene.

In the hard rock deposits space, the Greenbushes project in Western Australia stands out

as one of the largest supplying high grade spodumene ore (2.8-3.3% Li2O versus 1-2% Li2O

recorded in other hard rock deposits) for processing and production of both technical-grade

and chemical-grade lithium concentrates.

Generally, brine deposits are more cost competitive than lithium hard rock mines, despite

higher grades recorded in a number of spodumene projects (see below Li2O content

comparison between different lithium deposits).

Operating costs at major lithium producing projects (incl breakdown between hard rock and brine deposits)

Li2O grades in lithium deposits (blue bars for hard rock deposits; green – Li rich clay; grey – brines)

Source: Roskill (2013), Company reports, SPA


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Processing Brine deposits are developed using solution mining with brine pumped from the

underground into evaporation ponds (like seen on the cover of this report), concentrated,

purified from deleterious elements (e.g. magnesium/lithium ratio being the most important

one) and by-products (e.g. potash and boron) and taken for further treatment in the

processing plant for production of lithium carbonate and lithium chloride. Lithium

carbonate is reacted with a lime solution to produce lithium hydroxide brine and calcium

carbonate salt, which is filtered and piled in reservoirs. The brine is evaporated in a multiple

effect evaporator and crystallised to produce the lithium hydroxide which is dried and

bagged ready for shipment.

Mined ore at hard rock deposits is going through a standard beneficiation process normally

involving crushing, milling, a series of gravity, magnetic separation and flotation stages for

production of chemical and technical grade lithium concentrates which are then converted

into lithium carbonite and lithium hydroxide.


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Appendix I

New Developments in the Li-Ion Trechnology 24M

On the 22nd of June 2015, 24M released a statement saying that they have come up with

some innovating technology that is “the most significant advancement in lithium-ion

technology in more than two decades”. They reduced the amount of non-conducting

materials by 80%, and drastically increased the size of the electrode so that more charge

can be carried and conserved. Another key asset to 24M is their efficient production of

batteries. They have already raised over $50m in funding since 2010 and are aiming to

upgrade their current facility in 2017.

The new battery is referred to as a “semisolid lithium ion cell” with a number of advantages

when compared to conventional Li-ion batteries.

Conventional battery is expensive and complex to manufacture. First of all, a conventional

battery starts off with a thin metal foil coated with layers of liquid (ink or paint) to form its

electrodes, which then has to be dried in a series of ovens and processed further. 24M

bypasses all of these initial steps which would usually take around a day to produce, and

starts off with a wet electrode that “has everything you need in it”, and “can be produced

in an hour” (words of co-founder Yet-Ming Chiang). The total time taken for production of

the semisolid battery is one fifth of the time it takes to create conventional Li-ion batteries.

All the components used are already in the Li-ion supply chain, and the semisolid battery

doesn’t contain any costly components, so from a materials stand point the process is

inexpensive due to reliability of resources and established trade markets.

There are fewer processes involved in the creation of 24M’s innovation, therefore a smaller

chance for things to go wrong, a smaller factory is required for production and a lower

capital expenditure (30-50% lower). The cost of building a factory for semisolid Li-ion

batteries is around one tenth of that of traditional Li-ion battery factories, and only uses

one fifth of the space of a conventional factory.

BioSolar Inc

BioSolar has come up with a solution to increase energy storage of the battery by raising

the charge capacity of the cathode. The cathode is engineered from a polymer, similar to

that of low-cost household plastics. Through smart chemical design, the polymer can hold

an enormous amount of charge. BioSolar exploit the fast redox-reaction properties of their

created polymer to enable rapid charge and discharge. The stability of this redox reaction

enables the battery to have a better charge life than conventional batteries, which lose

around 80% of their storage capacity after 1000 charge-discharge cycles. The BioSolar

batteries have been tested to cycle over 50,000 times without any degradation in the super-

capacitors. By increasing the battery life, this reduces the cost of the ownership of the

battery.

So by combining the new ‘super cathode’ with conventional anodes, a higher capacity

lithium-ion battery can be produced. With a lower cost due to the inexpensive polymer use,

a new redesign into the chemistry supplying a faster charge/discharge rate and a stable

chemical reaction providing a longer lifetime, BioSolar could be the first company to break

the industry renowned US$100/kwh energy output milestone. Most lithium-ion batteries

have an output of US$300/kwh, however BioSolar aim to smash the US$100/kwh and have

predicted an output of US$54/kwh. In the case of electric vehicles, US$100/kWh will make

them undeniably cost-competitive with gas-powered vehicles. And in the case of solar, it


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will finally be cost effective to store daytime solar electricity for night time use and be less

reliant on, or completely independent of, the power grid.


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Appendix II

Competition between Different battery Systems Sodium-Ion Batteries:

Sodium (chemical symbol Na) has a higher energy density than lithium and is considerably

more abundant. It also costs less to produce sodium and sodium compounds, and the cost

of the relevant cathode and electrolyte is around half of that of a lithium-ion battery.

The main drawback to sodium ion batteries is the lack of research and testing undergone

on them. An English company called Faradion have taken the brilliance of Oxford University

graduates and converted it in to a possible future solution of renewable energy. Considering

that lithium ion batteries are so well understood, and we have many years’ worth of

resources left to consume, some people may think that it seems to be a pointless

investment of time and money. Well, the demand for lithium ion technology is only going

to increase, as electric cars, electric appliances and even electric homes become more

readily available. This may spark a greater demand than there is supply, which is where

sodium ion technology can take over, and eventually make lithium ion batteries obsolete.

Aluminium-Ion Batteries

Researchers at Stanford University have created a fast-charging and long-lasting

rechargeable battery that is inexpensive to produce, and which they claim could replace

many of the lithium-ion and alkaline batteries powering our gadgets today. The prototype

aluminium-ion battery is also safer, not bursting into flames as some of its lithium-ion

brethren are wont to do.

The prototype battery features an anode made of aluminium, a cathode of graphite and an

ionic liquid electrolyte, all packed within a flexible, polymer-coated pouch.

Unlike typical lithium-ion batteries that last around 1,000 charge-discharge cycles, or other

aluminium-ion battery lab attempts that usually died after just 100 cycles, the Stanford

researchers claim their battery stood up to 7,500 cycles without a loss of capacity.

Furthermore, aluminium is a cheaper and more abundant metal than lithium, and so the

aluminium-ion technology offers an environmentally friendly alternative to disposable AA

and AAA alkaline batteries used to power millions of portable devices.

Currently, one of the prototype battery's biggest shortcomings is its voltage. Although

researchers point out it is more than anyone else has achieved with aluminium, the battery

only generates around two volts of electricity, which is around half that of a typical lithium-

ion battery. However, the researchers are confident they can improve on this.


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