LITHIUM INDUSTRY AND MARKET

The lithium industry continues to be a particularly vibrant market segment and this is expected to continue well into the next decade as the clean energy revolution establishes itself globally. It is lithium’s unique properties which make it a crucial element in high-performance rechargeable batteries that is creating such strong future demand growth projections from industry commentators, which in turn is supporting an attractive market outlook for future suppliers.

Lithium and its uses

Lithium is a chemical element with the symbol Li, and atomic number 3 in the Periodic Table of Elements. It is the lightest solid element at ambient temperature, indeed the lightest metal.

Lithium has numerous uses including in medical applications, ceramics, glass, lubricants and nuclear technology. Most importantly it is the key component   of long life, rechargeable lithium-ion batteries, used to power mobile devices (phones, laptops and other consumer electronics). However, in more recent times battery manufacture has been accelerating due to the burgeoning demand in automotive applications (electric vehicles – EVs), and also energy storage systems (ESS) to better utilise renewable energy supply (solar and wind generated power).

Lithium-ion batteries are lighter and can store three times more energy than nickel-hydride and lead-acid batteries. Their unit cost continues to fall with technological improvements, adding further to demand and improving competitiveness.

Supply

Nearly all the world’s lithium is produced from two sources, brine deposits (mostly in South America) and spodumene (hard rock) mines. Brine production has the advantage of comparatively low operating costs, but long development and ramp-up lead times and comparatively high capital costs to establish a project.

Hard rock spodumene projects can generally be developed in a shorter timeframe than brine projects and tend to have a more competitive capital cost to produce a spodumene concentrate. However, the concentrate requires downstream processing including roasting and as a result, attracts a relative high operating cost.

Lepidico aims to introduce a new third major supply source, from previously ignored mica deposits, thanks to its proprietary L-Max® technology.

L-Max® is a clean-tech process with competitive capital intensity and low operating costs after eco-friendly by-product credits.

Demand

Global lithium carbonate consumption in 2016 was 197,000 tonnes per annum (Roskill, August 2017). Of this more than 56,000 tonnes was consumed in lithium-ion batteries (LIBs) and a further 18,000 tonnes was converted into lithium hydroxide, mainly for use in LIBs.

Whilst other lithium applications grow at a slow but steady rate, projected demand growth in batteries, especially for use in EVs is much higher, in large part because of significantly improved cost efficiencies in LIB manufacturing

– “the cost per kilowatt-hour has fallen from US$1,000 in 2010, to $130- 200 today” (The Economist, 12 Aug 2017 – “The Death of the Internal Combustion Engine”)

It’s all about the batteries…

  • ~700kg LCE is required per GWh of LIB.
  • Roskill foresee possible 1,000GWh of batteries being required in the next 10 years just for EVs, up from an estimated ~90GWh in 2016.
  • Hence 1Mtpa of LCE would be required by 2026, a mighty 25% compound annual growth rate.
  • Lepidico sees the opportunity for it to enter the lithium market as a new low cost producer with attractive margins throughout the commodity price cycle.
  • The lithium market is relatively opaque when compared to those for many other metals. This however, is likely to change as demand increases, with for example the London Metals Exchange considering its involvement (Mining Journal 31 August 2017), via the introduction of contract arrangements to better manage the market and provide greater price transparency.

Clean technology revolution

The move towards EV adoption and thereby lithium-ion battery manufacture is accelerating as testified by recent announcements from major conventional car manufacturers.

  • Volkswagen CEO Matthius Muller announced plans, on 28th April 2017, that would see VW build 2-3 million EVs per annum by 2025;
  • on 5th July 2017, Volvo’s Chief Executive Hakan Samuellson announced that from 2019 all new Volvo cars will have electric or hybrid engines; and
  • France’s Ecology Minister Nicolas Hulot announced that France will end sales of petrol and diesel vehicles by 2040.

Environmental drivers

It is not just the political necessity of dealing with climate change that has led to the clean technology revolution but the requirement to better address public health and air pollution concerns in many heavily populated parts of the world such as China. EVs and ESS linked to renewable energy will reduce particulate emissions and noxious gases in the atmosphere, leading to a cleaner, greener world for all. Lithium has a vital role to play in this regard.