What happened in the lithium market? Here’s a look at the major lithium trends of 2017, from megafactory announcements to offtake agreements.
With the popularity of electric vehicles (EVs) growing at an unstoppable speed, lithium continued to be a hot commodity in 2017.
But what were the major trends in the lithium market? Read on for an overview of the factors that impacted the lithium market in 2017, from the main supply and demand dynamics to how analysts thought the metal performed in each quarter of the year. Overall, experts agree that the excitement seen this year is unlikely to let up.
Lithium trends 2017: Supply concerns increase
For the past three years, Tesla (NASDAQ:TSLA) has brought much excitement to the lithium space, and 2017 was no exception.
In January, the company started production at its Nevada facility, which is expected to produce 35 GWh per year of lithium-ion battery cells in 2018. During Q1, the Elon Musk-led company also announced plans to open two to three EV gigafactories by the end of 2017, boosting excitement among investors.
But as many analysts say, Tesla is just one story, and this year many carmakers started to outline plans to win a space in the electric car race. In fact, in Q1, analysts at UBS (NYSE:UBS) raised their forecast for global EV sales in 2021 to 3.1 million units from 2.5 million, and to 14.2 million units in 2025.
This surging demand for EVs is expected to push demand for lithium-ion batteries above 400 GWh by 2025, Benchmark Mineral Intelligence says. That means supply of lithium, a key component in the batteries, will need to reach 400,000 to 500,000 tons by the same year.
“There’s much more consensus on demand; we’re no longer even debating demand. We’re shifting to supply and whether, as an industry, we can deliver,” John Kanellitsas, vice-chairman of Lithium Americas (TSX:LAC), said earlier in 2017.
“The continued pricing strength in lithium has been a surprise,” said Chris Berry of House Mountain Partners and the Disruptive Discoveries Journal. He added that his previous demand forecast out to 2025 for lithium ended up being too low. “I thought the lithium market (on a LCE basis) would grow to roughly 550,000 tons per year, [but] in the middle of the year I adjusted this upwards to 617,000 tons by 2025. This still appears too conservative based on potential gigafactory-scale expansion,” he added.
In fact, Benchmark Mineral Intelligence is now tracking 26 megafactories, up from just three back in 2014. The combined planned capacity of these plants is 344.5 GWh. To put that into perspective, total lithium-ion cell demand in 2017 is estimated at 100 GWh.
While that number might seem high, global lithium-ion battery demand is expected to grow between six and seven times by 2026, which will require a battery pipeline of nearly double what exists today.
“We said a few years ago that the present lithium price run will continue, and it has. It has, and it’s gone into a second phase now,” Benchmark Mineral Intelligence Managing Director Simon Moores told the Investing News Network at this year’s Cathodes conference.
“Quite simply, there’s not enough supply to meet the demand, and the demand is increasing quicker than the supply is. Much, much quicker. Therefore, lithium’s price will remain strong for some time,” he added.
For his part, lithium expert Joe Lowry said in his Lithium in Review report that “2017 was a year when virtually all the positive surprises were on the demand side and most of the negative surprises were on the supply side.” The expert also recently explained that the “Star Alliance of the lithium market” was one of the major trends this past year.
The industry needs to raise another $7 to $9 billion to get to where it needs to be by about 2025 to 2026.
Lithium Overview: Why lithium, why now?
Lithium powers many of today’s handheld tools, our modern mobile communications, our computing devices and increasingly our transportation system. Lithium-ion is the leading energy storage technology, one cannot understate its importance in transforming not only communications gadgets into marvels of handheld technology, but in taking electric cars from a niche curiosity into a major clean energy revolution for the transportation sector.
“The top five lithium ion battery manufacturers are ramping up capital expenditure with a view to almost tripling capacity by 2020.” The Economist
China and India are both going to 100% electric vehicles. Every major car manufacturer has electric models. Volvo has even promised to phase out traditional internal combustion engines (ICE) from 2019.
France has promised to end the sale of gasoline and diesel vehicles by 2040, the U.K. quickly followed suit.
Gigafactory’s making lithium-ion batteries for electric vehicles are springing up across the globe. Tesla’s Nevada Gigafactory, to be completed in 2018, will produce more lithium-ion batteries than were produced globally in all of 2013. Elon Musk, Tesla’s CEO has already announced plans to build four more Gigafactory’s.
By 2021, Chinese Gigafactory’s will provide 3.5 times more gigawatt-hours of battery cells than Tesla’s current Gigafactory. Europe recently announced five Gigafactories will be built.
Bloomberg reports that global battery-making capacity is set to more than double by 2021, topping 278 gigawatt-hours a year compared to 103 gigawatt-hours at present.
“Lithium isn’t a bubble, it’s a fundamental change in energy usage.” www.financialpost.com
Morgan Stanley analysts project that by 2050, 81% of 132 million new auto sales will be electric.
There’s a looming problem.
“It’s not clear that the resource supply chains exist yet for all these factories.” David Hart, director E4tech
Translation – There isn’t enough lithium currently being mined to supply all those Gigafactory’s. “We estimate the lithium industry is going to need between $4-$5 billion of investment out to 2025.” Simon Moores, Benchmark Minerals Intelligence
The potential for supply-demand gaps to open up over the coming decade is significant, a supply shortage of lithium will cause major issues in the battery supply chain.
Elon Musk said, in 2016: “In order to produce half a million cars a year … We would basically need to absorb the entire world’s lithium-ion production.”