Best of the Week
Most Popular
1.Putin’s World: Why Russia’s Showdown with the West Will Worsen - John_Mauldin
2. Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - Nadeem_Walayat
3. Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - Austin_Galt
4.Gold Price Golden Bottom? - Toby_Connor
5.Gold Price and Miners Soar on Huge Volume - P_Radomski_CFA
6.Stock Market and the Jaws of Life or Death? - Rambus_Chartology
7.Gold Price 2015 - EWI
8.Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - Nadeem_Walayat
9.Gold, Silver, Crude and S&P Ending Wedge Patterns - DeviantInvestor
10.Is the Gold And Silver Golden Rule Broken? - Michael_Noonan
Last 5 days
Stock Market At Minor Top - 22nd Dec 14
UK Christmas Sales 2014 High Street Start Dates List - 22nd Dec 14
Ruble Takedown Exposes Cracks in Putin’s Defense - 20th Dec 14
Oil Drilling Our Way Into Oblivion - 20th Dec 14
Stocks Bull Market Resumes - 20th Dec 14
Gold And Silver Nothing Is Ever As It Seems And No Respite For PMs - 20th Dec 14
What Are Technical Indicators Saying About the Stock Market? - 20th Dec 14
Here’s How You Can Still Make 27% With Apple Even if You Buy Now - 20th Dec 14
Gold Stocks to Shine in 2015 - 19th Dec 14
Why Alibaba Stock Shares Are a Screaming Buy - 19th Dec 14
China, Dollar, Japan, Europe Burning Questions for 2015 - 19th Dec 14
U.S. Economy is in a Sweet Spot! - 19th Dec 14
US Dollar and the Gold Fairy Tale - 19th Dec 14
Show Me The Money (Flow)! Tracking Money-Flow Through Value Shifts In Stock Markets - 19th Dec 14
The Commodities Market Is Not Dying, It’s Just Hibernating - 19th Dec 14
The Price Of Gold And The Art Of War - 18th Dec 14
Euro Succumbs to ECB QE Expectations and FOMC - 18th Dec 14
John Williams: A Downhill Run for the U.S. Dollar in 2015 - 18th Dec 14
Outrage at Taliban Islamic Fundamentalists Massacre of 132 Pakistani School Children in the Name of God - 18th Dec 14
How Inflation Changes Retirement Benefit Choices - 17th Dec 14
The Real Reason It's Tough to Beat the Stock Market - 17th Dec 14
Russian Currency Crisis and Debt Defaults Could Create Contagion in West - 17th Dec 14
How to Profit From Russia's Stock Market Crash - 17th Dec 14
Russia Crisis - If You Put Your Money in the Bank Will You Get it Back? - 17th Dec 14
Crude Oil Price Crash, U.S. Employment and Economic Growth - 17th Dec 14
Opposing Forces At Play In Gold and Silver Precious Metals Complex - 17th Dec 14
Wall Street Will Always Find An Excuse For Not Raising U.S. Interest Rates - 17th Dec 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Dramatic Stock Market Selloff

Lithium Demand, Pricing, and Supply Forecast Considered as Li-ion in Automotive Use to Surge

Commodities / Metals & Mining Mar 29, 2009 - 02:39 PM GMT

By: Madison_Avenue_Resea

Commodities Best Financial Markets Analysis ArticleCurrent Lithium Production and Use - Well over 95,000 tonnes of lithium carbonate equivalent was produced in 2008, more than double the amount from a decade earlier. The USGS estimates the current global end-use markets for lithium as follows: batteries, 25%; ceramics and glass, 18%; lubricating greases, 12%; pharmaceuticals and polymers, 7%; air conditioning, 6%; primary aluminum production, 4%; continuous casting, 3%; chemical processing 3%; and other uses, 22%. Lithium use in batteries expanded significantly in recent years because rechargeable lithium batteries were being used increasingly in portable electronic devices and electrical tools.


At a conference on lithium on January 26, 2009 Patricio de Solminihac, Executive Vice President and COO of Chemical & Mining Co. of Chile Inc. A.K.A. Sociedad Química y Minera de Chile S.A (SQM) (NYSE: SQM ), the world's largest lithium carbonate producer, said there has been compounded annual growth of 5-7% over the past five years and 2008 demand for lithium carbonate equivalent is estimated to have been in the range of 115,000 to 118,000 tonnes (~2% above 2007 levels).

Total Global Resources & Reserves of Lithium - At present noted Geologist Kieth Evans estimates total global resources and reserves of Li at 30,120,000 tonnes (160,000,000 tonnes Li carbonate equivalent). The following chart shows the estimated break down according to source types:

This break down will change over time as new entrants develop hectorite clay and oilfield brines

Figure 1: Source; Notes taken by attendee to Jan./09 talk by Geologist Keith Evans

Throughout noted Geologist Keith Evans' 40+ year career in the lithium industry he has made it his responsibility to monitor industry developments particularly in respect of new resources and he has continued as a consultant in a number of industrial minerals.

Forward Looking Demand for Lithium

Li-ion in automotive use to surge

Interest and demand in lithium minerals has increased significantly, driven by the increased importance and production of lithium-ion batteries as the next generation power source. The aforementioned VP & COO of SQM also made the following predictions: Lithium chemicals, excluding automotive battery potential, is estimated to maintain continued 3-5% annual growth over the next ten years. On the potential demand for plug-in hybrid (PHEV), electric (EV) and hybrid (HEV) vehicles, he offered various scenarios with assumption ranges, we offer his upper predictions; the upper range for penetration of all types of electric vehicles into the market in 2020 was at 20%, Li-ion penetration in 2020 was 80%, annual demand in 2020 for lithium carbonate equivalent was thus 55K-65K tonnes, and 135,000-145,000 tonnes in 2030 - this number was corroborated at the same conference in a different presentation by Steffen Haber, the President of Chemetall (a division of Rockwood Holdings Inc. (NYSE: ROC )), however Haber derived Li carbonate demand in the range of 90,160 tonnes to 145,480 tonnes for 2020, a decade earlier.

The problem with predicting the demand for the future use of lithium in transportation as a preferred medium of energy storage is that no one actually knows just how enthusiastic the trend will be. It could be, and should be, argued that miners, geologists, suppliers, and technologists should not make such predictions; their assumptions are guesses that are limited in understanding of the fact that this is a cultural phenomena. What is not necessarily factored into the assumptions is that there will not only be a "demand" but rather a "cultural push" that will for ever change the future of transportation as we know it. A look at the new US economic stimulus plan offers insight into just how big governments want to make it so; $2.4 billion has been set aside in the federal economic stimulus law to be granted by the U.S. Department of Energy to speed development of technology for plug-in hybrid electric vehicles. And lets not forget the smart grid that we are told is going to be built between all states to supply the juice. Once yet-to-be-seen incentives and coercion to buy (or penalties for not buying) these cars are factored into the equation, the aforementioned assumptions and predictions are likely to be thrown out the window. 

All Electric, Zero Emission Vehicles New lithium technology allows rapid acceleration and long life.

Figure 2.  Zero S Motorcycle Using a lithium-ion battery array the S model does 0-60 mph in 4 seconds and has a top speed of 70 miles per hour.

Figure 3.  Tesla Roadster Using a lithium-ion battery array the Roadster model does 0-60 mph in 3.9 seconds, ~244 miles per charge, top speed 125 mph (electronically limited).

The Price of Lithium

Healthy demand is being met with increased pricing. The economics of Li commodity as a percentage of battery cost today allows for large upside commodity price increase with little negative effect.

There is no international lithium spot price. On March 24, 2009, as part of our research process to determine pricing, Madison Avenue Research Group contacted George Sandor, Sales and Marketing Director – Energy, Industrial, Consumer, & Construction Markets of FMC Corporation (NYSE: FMC ). Mr. Sandor said there are ninety different varieties of lithium that FMC sells and pricing is not simplified enough to give a generic quote as there are different volumes and purities according to the clients needs, however technical grade carbonate would typically be what battery makers would be interested in. A client coming in for a quote would go through a long checklist of specifications including purity, particle size, shipping, packaging, and so on. Madison Avenue Research has been able to ascertain from various sources that lithium prices  rose  nearly 100% in many situations in 2008. Here is a sampling of recent lithium price transactions that were shared with us, the first being what a large battery makers would typically source: Lithium Carbonate large contracts in March 09 $2.80/lb to $3.00/lb. (or $6,613/tonne) , other reported figures in varying grades and purity were Petalite 4.2% Li20 big bags F.O.B. Durban $165-260, Spodumene concentrate >7.25% Li20 F.O.B. W. Virginia short ton bulk $620-680, Glass grade spodumene 5% Li2O F.O.B. W. Virginia short ton bulk $340 - $390.

It is important to note that the market could easily absorb a significant increase in lithium price, many multiples its current pricing, without negatively impacting the cost of batteries as the actual raw cost of the lithium in vehicle batteries is currently less than 3% as a proportion of cost. Lithium prices could increase ten fold and it would have a nominal impact on the actual price of the end battery. Additionally, with a relatively small number of producers controlling a large percentage of global production an effective oligopoly will make lithium a strategic commodity in decades to come (see split of the pie by producers below).

FMC gets their Lithium from their Sala de Hombre Muerto bines in Argentina, however lithium is a small part of their company so a large increase in lithium prices only has a nominal impact on earnings. Similarly with the largest lithium producer in the world, SQM, their Li business represented ~11% of total revenues for the last fiscal year. A more pure play lithium junior miner with resources or highly prospective quality project may be a way to expose a portfolio to the solid future demand for lithium (see case study at the following URL http://madisonaveresearch.com/lithiummkt09.htm ).

Small Number of Miners and Split of the Pie - Eric Norris, Global Commercial Director for FMC's Lithium Division, offered a synopsis of the split for Li suppliers. In his presentation Norris put market demand of 93K tonnes for lithium carbonate equivalents in 2007 and offered the following split for market supply:

Figure 4: Source; Notes taken by attendee to Jan./09 talk

Forward Supply for Lithium - A Highly Strategic Metal in Years to Come

Healthy supply to meet healthy demand - new entrants are needed

The pie chart in the top right corner of this web page shows the break down of total global resources and reserves of Li according to source types as estimated by Geologist Keith Evans on January 26, 2009. In his presentation Evans estimates total global resources and reserves of Li at 30,120,000 tonnes (160,000,000 tonnes Li carbonate equivalent).  In a different presentation on the same day by the VP & COO of SQM, Solminihac estimated total world lithium resources exceed 300,000,000 tonnes lithium carbonate equivalent (56,400,000 tonnes of lithium) with reserves in excess of 100,000,000 tonnes (18,800,000 tonnes of lithium). The analysis given in his presentation puts 40% of total world reserves in the Salar de Atacama, a 280K hectare salt encrusted depression, fed by an underground inflow of water from the surrounding Andes Mountains, described as the world's largest known commercially exploitable reserves of lithium at 40,000,000 tonnes lithium carbonate equivalent (7,520,000 tonnes of lithium). The total Salar de Atacama lithium resource was estimated to be in >190,000,000 tonnes lithium carbonate equivalent (35,700,000 tonnes lithium).

World reserves numbers are fluid, the term ‘reserves' apply only to material that can be economically produced at the time of determination. The term also implies that the material can be extracted with existing technology at a specific price-usually the prevailing market price.

Currently lithium production supply and demand are relatively in balance, however there is a lithium supply deficit looming and new entrants to the market place will be needed. TRU Group's President, Edward Anderson, made a presentation on January 26, 2009 to delegates at a lithium conference and showed a demand curve where existing supply was increased by only one new entrant (Rincon Lithium - Argentina Project) in 2011-2012 and a resulting undersupply position was in store for 2020. Mr. Anderson demonstrated to attendees that another large chemical grade lithium supplier would need to enter the market in time to eradicate the undersupply forecast.

New entrants to the lithium supply side will come as demand increases and source logistics and economics fall into place. Strategic investors are already positioning themselves in lithium source types that are not yet being exploited, such as hectorite clay and oilfield brines - two source types that would rank ahead of hard rock pegmatite/spodumene for rapid development.  Hard rock pegmatite/spodumene, although now being mined in some places like China, is generally cost prohibitive or at least disadvantaged when compared to brines. Strategic investors would do well to look at the shares of companies that have highly prospective hectorite clay or oilfield brines as lithium sources.

By Joseph Williams, Editor and James O'Rourke, Research Specialist

Madison Avenue Research Group

http://madisonaveresearch.com/lithiummkt09.htm

MADISON AVENUE RESEARCH GROUP - http://madisonaveresearch.com
Recognized leaders as providers of corporate research fact sheets, analytical research reports, and corporate overviews worldwide.

© 2009 Copyright Madison Avenue Research Group - All Rights Reserved

Disclaimer & Disclosure: The information contained herein is believed to be accurate but this cannot be guaranteed. The analysis does not purport to be a complete study of securities and issues mentioned herein, and readers are advised to discuss any related purchase or sale decisions with a registered securities broker. Companies mentioned herein may be very early stages of development and thus can therefore be subject to business failure, and are to be considered speculative and high risk in nature. Reports herein are for information purposes and are not solicitations to buy or sell any of the securities mentioned. The author may or may not hold a position (long or short) in the securities mentioned herein. This is a journalistic article and the author is not a registered securities advisor, and opinions expressed should not be considered as investment advice to buy or sell securities, but rather opinion only. The publisher may make take journalistic liberties employing the use of pseudonyms as reference contacts and accepting information at face value from what it believes to be credible sources.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

R. Sweeney
10 Apr 09, 16:57
On the definition of 'Reserves'

Your conclusions are 2 orders of magnitude different from the Meridian International report:

http://www.meridian-int-res.com/Projects/Lithium_Microscope.pdf

Care to reconcile the discrepency? Do you assume the total destruction of ecosystems to recover material, thereby declaring it a 'reserve'?


dave
10 Oct 09, 07:04
lithium

Mr. Prechter what company do I invest in for a profit in the lithium craze or do I buy it like gold


A Carden
23 Jul 10, 03:00
Forecast 2010-2016

For the next 5 years, Lithium is the answer! After that. science will answer! But for NOW!, Lithium is my provider, just look at the nunbers and you'll see what I mean. Or are you too rapped-up in the Carbon Market to see it? Regards,


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014