Why Lithium ?

Lithium is the lightest known metal the least dense solid element with the greatest electrochemical potential which leads to excellent energy-to-weight performance. Hence the importance on any mobility application.

The Electric Vehicle and portable electronics are an important part of the interest in lithium but other markets, such as E-bikes and Energy Storage could be very large as well. This is all being driven by a global desire to reduce carbon emissions and traditional infrastructure networks. This shift in energy use is supported by the improving economics of lithium-ion batteries. The first lithium ion cells produced by Sony Corporation in the 1990's had energy density levels of roughly 90Wh/kg and cost of approximately US$2,000/kWh. Today's Panasonic 18650 batteries used in Tesla Electric Vehicles have an energy density of approximately 150Wh/kg and they cost less than US$250/kWh. We expect this trend to continue.

Global battery consumption is set to increase, on average, 3 to 5 times over the next 10 years, placing pressure on the battery supply chain & lithium market. Today's demand of approximately 200,000 tonnes of LCE is expected to have a tremendous growth.

Overview of
Supply and Demand

Lithium-ion battery costs are falling rapidly as global battery producers expand manufacturing facilities, unlocking economies-of-scale.

Energy cell costs have fallen from US$900/KWh in 2010 to around US$250/kWh today. This cost reduction is opening up new demand applications for lithium-ion and making lithium-ion batteries superior to other battery technologies not just on power and performance but also on cost. It is believed that costs can fall to US$150/kWh by 2020 as multinational companies like Tesla, Panasonic, LG Chem, Foxconn and BYD further expand global battery manufacturing capacity.

Demand

Electric Vehicles (EV)

Unlike EV sales in the U.S. and Europe, which are driven by regulatory changes, China EV sales are currently driven by government subsidies and purchasing quotas on traditional vehicles in big cities. Global investment in the battery supply chain and the need for cheaper batteries is being driven by the emergence of the Electric Vehicle. This growing market has been pioneered by Tesla in recent years, but the larger catalyst for global mass market uptake of EV technology is China, where government subsidies are in place for both passenger EV vehicles and commercial EV's (buses and small trucks). Hybrids & plug-in hybrids currently dominate global EV sales, with full-electric EV's accounting for only a small portion. The expectation is that EV sales to grow considerably by 2025 with full electric EV sales rising as a % of the total EV sales.

E-Bikes

China is the world's largest producer and consumer of electrical-bicycles. It sold 30 million E-bikes in 2015 and has accumulated 200 million E-bikes on the road already. The E-bike market is a lead-acid dominated market, but as lithium-ion costs continue to drop, penetration of lithium-ion batteries has been climbing. It is expected that lithium-ion demand should continue grow as it gains market share from lead-acid. The typical e-bicycle battery size is 1kWh. Therefore, annual battery demand from this market is forecast to reach 20GWh in 2020.

Energy Storage

The Energy Storage market is reaching an inflexion point. Driven by the declining costs of lithium-ion batteries, battery storage is now economically feasible for a number of Energy Storage applications. The impact on installed capacity has been immediate, with installed battery capacity in Energy Storage products doubling in two years, albeit off a low base. Lithium-ion batteries should be the leading technology, with superior performance and rapidly falling costs helping ensure it will have a substantial piece in Energy Storage.

Traditional Markets

While traditional markets (consumer electronics, glass, ceramics, greases, medicat etc) are not seen to be major drivers of demand growth, it is expected that these existing markets grow at 3.6% p.a. over the next 10 years. Current lithium consumption in these markets today are approximately 1600,000 tonnes of LCE.

Supply

Traditional Markets

Lithium is produced from either brine-based deposits or from hard-rock mineral deposits at an approximate ratio of 50/50. Lithium products derived from brine operations can be used directly in end-markets, but hard-rock lithium concentrates need to be further refined before they can be used in value-added applications like lithium-ion batteries. The current lithium supply market is dominated by four major producers. Albemarle, SQM, FMC and Sichuan Tianqi accounted for 83% of global supply in 2015. An increase in lithium prices in the late 2000's led to a wave of investment in mine expansions for South America-based lithium brine assets and increasing conversion capacity in China for hard-rock lithium feedstocks. However, stagnant global growth met an oversupplied lithium market, leading to depressed lithium pricing from 2013 until mid-2015.

The lithium supply market is relatively small compared to most other industrial commodities; however, it is not a fragmented market or lacking large market participants with the ability to deploy capital. The five largest global producers have a combined market capitalization of over US$60 billion. Further, these five companies control close to 50% of global reserves and over 90% of current production.

Market share of 2016 production

Industry Image Chart One

Top 5 Producers

Industry Image Chart Two