Demand for lithium is soaring, but the supply chain should meet it

The first wave of the lithium boom has disappeared. This is significant for early investors who entered by 2016 and soared all the way to the end of 2017. Then, in 2018, we published endless negative stories about the industry, many of which seemed to be well-informed or obviously wrong. The underlying theme is that many groups have completely underestimated the speed at which electric cars change, and thus promoted the surge in demand for lithium.

For example, many people think that the electric car industry is growing slowly. In fact, global electric vehicle sales increased by 58 last year and increased by 59 in the first quarter of 2018. The number of electric vehicles available will reach 289 from the final 155 by 2022. Another indication is that there are 30 new lithium-ion gigafactors on the way.

Lithium demand

My lithium demand model is based on reasonable assumptions, such as a 15 per cent penetration rate by 2025(China reached 3.7 per cent in April 2018, and global penetration should exceed 2 per cent by 2018). Lithium carbonate equivalent(LCE) is projected to reach 1.1 million tons of electric vehicles by the end of 2025. By 2026, Luosijier had tripled his demand forecast for LCE to 1 million tons, compared with May last year.

The key to understanding is that demand doesn't just come from the boom in electric car sales. Demand for other electric vehicles(electric buses, electric trucks, electric boats and boats, electric bicycles, upcoming electric aircraft, energy storage and electronics) is also growing.

At present, electric buses, especially in China, have been a huge driver of demand for lithium. Soon we will have electronic semi-finished products and various electric trucks. Just last week, Daimler announced the launch of two new electric trucks for the US market, using Tesilaban, which is expected to start production in 2019. Full-size electric half-trucks require 10-16 times more batteries than electric vehicles.

Lithium electricity supply

Meanwhile, the supply of lithium at the mining level is responding to the surge in demand. In 2018, we will see four new lithium miners become producers-Tawana, AMG Advanced Metallurgy Group, Altura Mining Co., Ltd. and Pilbara Minerals Co., Ltd.. This will certainly increase the supply of lithium pyroxene; However, most industry experts believe that the conversion capacity is insufficient.

In any case, the increase in lithium battery supply in 2018 will restore the supply and demand situation of lithium batteries to a more balanced level, and the price of lithium(especially the spot price of lithium batteries in China) will be somewhat eased. In 2019, we are likely to see some expansion by existing lithium miners to meet the surge in demand, and by 2020, some new lithium mining companies such as LithiumAmerica Corp.. , Bacanora MinelsLtd.. and other companies such as Nemaska LithiumInc.. , AISResources New lithium battery Co., Ltd..

We may also see further consolidation of industries such as SQM/Kidman joint ventures. New lithium processing plants are also under construction, such as the Tianqi/Albemare Kwinana plant in Western Australia. SQM/Kidman also recently announced plans for a new lithium treatment facility in Kwinana.

All in all, demand for electric vehicles will be much stronger than many now think. The supply response was very strong due to the surge in demand for lithium. That means new lithium supplies should keep pace with demand until 2020. We may see oversupply or undersupply, with LCE contracts priced at between $12,000 and $20,000 per ton. The current price is US$ 16,400 per ton. For investors, this would mean that the lithium-miners that can expand production, and the younger generation that can be put into production, should still give investors very good rewards. As we move into the new fields of electric vehicles and energy storage, the lithium mining sector should have a very good period of one to two decades.

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