Lithium: Highlights from Roskill’s Lithium Team client briefing
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Posted 22nd October 2020 in ?Industry news.
By Dominic Wells, David Merriman, Jake Fraser, Kevin Shang and Oliver Heathman
This week saw Roskill’s Lithium Team present on the latest developments within the lithium and battery industries. Collated below are some of the key highlights from the briefing, a service available exclusively to clients of our lithium report and cost model service.
Lithium Market UpdateDavid Merriman, Manager – Battery & Electric Vehicle Materials
Jake Fraser, Senior Consultant – Battery & Electric Vehicle Materials
Chilean output remains strong
Chilean lithium production from brine operations has remained strong despite lower pricing, with SQM looking to increase market share. SQM and Albemarle plan to significantly increase production at their respective Atacama operations, though are under scrutiny on brine extraction and freshwater usage. The increased capacity will require the use of new technologies to improve lithium recoveries, though the implementation of this technology could begin to erode the Atacama operations position on the cost curve and require notable up-front capital to install and commission.
Product specification requirements becoming more stringent
Since 2018, there has an increasing need for the re-processing and upgrading of low-quality refined material such as technical-grade carbonate. This has predominantly been tied to the ever-evolving preferences of Tier 1 cell markers in South Korea and Japan, where quality specifications are becoming increasingly stringent. As a result, South Korea’s market share of hydroxide sourcing has changed in recent years, with South American hydroxide being replaced by Chinese and Russian product.
Major hydroxide material flow to Tier 1 cell makers in 2020
Source: Roskill
Refined stocks set to decline
Industry stockpiles of refined compounds have been increasing since 2016 and Roskill now estimates that volumes in 2020 equate to 6-9 months of chemical demand. However, owing to a forecast increase in demand between 2020-2023, Roskill expects industry stocks will decline to approximately 2 months’ worth of demand by 2022.
Lithium Production Cost TrendsOliver Heathman, Manager – Mining, Cost & Sustainability Research
We have seen a general flattening of the cost curve in 2020 brought about by three key developments:
- Chilean brine operations have returned to the bottom quartile helped by a marked reduction in their royalty payments due to falling lithium prices.
- The spodumene sector has also benefited from lower royalty payments, although not to the same degree, and a swath of cost-cutting measures and beneficial currency and input cost movements.
- The closure of several higher-cost mines.
Flattening of the cost curve in 2020
Source: Roskill – Lithium Cost Model Service
Reducing Lithium’s Growing Carbon EmissionsDominic Wells, Analyst – Mining, Cost & Sustainability Research
If the emissions intensity of new lithium supply remains the same, then total emissions are set to increase by a factor of six by 2030. However, we have identified several developments in the sector which could lower emissions significantly. The introduction of “cleaner” fuels, improved technologies, shortening transport distances and a transition away China’s carbon-intensive refining sector could mean future CO2 emissions from the sector end up some 30% lower.
Lithium’s total CO2 emissions under different future supply chain scenarios
Source: Roskill – Lithium Sustainability Monitor
Developments in the Cathode and Precursor IndustriesEileen Wu, Consultant – Chinese Battery Industry
Kevin Gunan Shang, Analyst – Cathode & Precursors & Materials
Upstream integration within the cathode industry
Lowering the production costs are difficult for the middle and downstream manufacturers within the EV industry without upstream integration. Roskill has analysed the upstream integration of current and future cathode production on a plants-by-plant basis and its impact on the production cost of the precursor material they produce. The analysis also looks at the cost impact of the subtle technological difference between producers.
Upstream integration of cathode production in 2020
Source: Roskill – Cathode and Precursor Materials Report
Cathode patent analysis
Since NCM materials were invented back in the 1990s, both scientific and business communities have been dedicated to improving the properties of NCM materials. By 2020, Roskill has identified four main blocks of patents concerning these materials has highlighted in the figure below.
Overview of NCM cathode patents
Source: Roskill – Cathode and Precursor Materials Report
An Update on ChinaXiaobai Liu?, Manager – Roskill China
The refining sector in China saw a further recovery in Q3 2020, supported by improved utilisation rates at cathode material producers and EVs sales. Furthermore, prices have shown signs of stabilisation on the back of declining stockpiles at conversion plants.
Looking forward, production is expected to continue this trend with a large number of plants in construction and plans in place for the development of many more over the next 1-2 years. This is being driven by an increasing number of downstream participants look to secure raw material supply.
Chinese quarterly refined lithium production, tonnes LCE
Source: Roskill – Lithium Outlook to 2030
Contact the authors This article was written by Dominic Wells, David Merriman, Jake Fraser, Kevin Shang and Oliver Heathman. Please get in touch below if you wish to discuss further:
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