RE:RE:TESLA The recently announced “supply agreement” Tesla has with an unproven company, developing an unproven resource using an unproven extraction technology seems, well, unbelievable.
Perhaps the list of equipment the new Tesla supplier needs to succeed includes duct tape, hoses and a bungee cord in addition to lots of clay. Little is known about the project.
Meanwhile, back on earth, the current proven “Big 3″ lithium hydroxide suppliers with actual resources seem not to believe enough in the future of the Gigafactory to expand.
FMC is “considering” expansion while Albemarle’s expansion plan focuses on the end of the decade. ALB seems more focused on pushing price up in the near term and waiting to see if a higher demand scenario actually unfolds before they invest. The only companies expanding are the ones in China with the highest cost structure. The global average price of lithium hydroxide in 2015 is about $7.50/kg but the battery quality average price is approaching $9.00/kg in Q3.
Because the Chinese suppliers are the only ones with excess capacity and the only ones who continue to expand as the market grows – China will gain share relative to the “Big 3″. In addition to having higher production costs, exports from China must bear a 17% VAT tax that the producers can’t recover through a drawback program. The only likely movement for hydroxide price is up over the next few years. Both FMC and ALB/Rockwood are discussing double digit price increases for 2016 with their customers. The Chinese suppliers will focus on share gain but ultimately move price up with the market.
This is what Tom Hanks looked liked in Apollo 13 when he wasn’t sure he had enough lithium hydroxide supply.
Perhaps we will be seeing an expression like that soon in Sparks, Nevada.
“Fremont we’ve got a problem…….”
After more than two decades with a major lithium producer holding senior leadership positions at lithium operations in the US, Japan and China; Mr. Lowry formed Global Lithium LLC – an advisory firm that works with lithium producers, users, investors, hedge funds and governments on four continents. He has an extensive network of contacts with the leadership of the world’s leading lithium suppliers and users. His knowledge of lithium supply and demand, pricing, the lithium ion battery market and industry trends enables him to provide unique insights into the world of lithium.