Global lithium supply developing at accelerating pace on growing demand

Growing demand for lithium compounds used in lithium-ion (li-ion) batteries such as lithium carbonate and lithium hydroxide over the past three years has prompted lithium producers to expand total production while diversifying their investments in different lithium operations to ramp up production faster and diminish asset risk.

Fastmarkets' research team expects global lithium demand to grow to at least 1.1 million tonnes per year of lithium-carbonate equivalent (LCE) by 2025 from an expected 300,000 tonnes of LCE in 2019.

Global lithium producers are set to continue to boost output year on year to maintain pace with growing demand, anticipating global lithium supply to reach 363,000 tpy of LCE in 2019, according to Fastmarkets' research team.

That said, supply figures may come in lower than this because low prices could lead to market adjustment and continued difficulties when expanding production, which could mean missed output targets.

Between January 2018 and the start of 2019, the battery-grade lithium carbonate price fell by 50.31% in China. The rapid supply increase of lithium compounds, competitive prices in the market by smaller size producers as well as the 2018 new energy vehicles (NEVs) subsidy policy in China were the main factors behind the price decrease throughout the year.

Fastmarkets assessed the Chinese domestic battery-grade lithium carbonate (min 99.5% Li2CO3) spot price at 75,000-83,000 yuan ($11,157-12,347) per tonne on January 3, 2019, down from 158,000-160,000 yuan per tonne on January 4, 2018. The most recent assessment for this market was 70,000-78,000 yuan per tonne on April 4, moving down from 72,000-80,000 yuan per tonne on March 28.

While global lithium supply is set to increase to fulfil the demand coming from the battery sector, Chinese producers should play a major role in adding new lithium-compound production in future.

Over 2018, China emerged as the world’s leading lithium-processing hub due to the likes of Tianqi Lithium, Ganfeng Lithium, Sichuan Yahua Lithium and Shandong Ruifu rapidly adding new units of lithium chemicals to the global market by converting lithium concentrate from hard rock. Lithium concentrate produced from hard rock - sourced mostly in Australia - became the major source of raw materials used in the production of lithium carbonate and lithium hydroxide in China in 2018.

In 2018, global production of lithium compounds from hard rock increased to 173,000 tpy of LCE from 60,000 tpy of LCE in 2016, while lithium compounds produced from brine totalled 148,400 tpy of LCE in 2018 from 140,000 tpy of LCE in 2017, according to Fastmarkets research team.

Although Chinese producers’ role as suppliers of lithium compounds in 2019 is set to keep increasing on support from the growing output of hard rock mined from Australia, lithium producers in the rest of the world continue to run into issues trying to raise output, so are set to produce the same amount of material in 2019 as in 2018.

The exception is Sociedad de Quimica y Minera (SQM), which is planning to raise output but also stockpile some material, thereby supplying a similar amount to the market this year as it did last year

Lithium producers ex-China
The four major lithium producers in the world excluding China - Albemarle Corporation, SQM, Livent and Orocobre - stand out due to their size and role within the global lithium market.

Albemarle Corporation has been the world’s largest producer of lithium carbonate and lithium hydroxide for many years, a role that could be consolidated through the agreement reached with the Chilean Economic Development Agency (Corfo) on March 9, 2018.

Through this agreement, Corfo authorized Albemarle to increase its production quota for LCE up to 145,000 tpy through to 2043, up from 33,000 tpy of LCE in 2017.

Yet the production issues encountered when expanding La Negra operations in Chile - where the company produces an important amount of its total lithium production - could affect Albemarle’s ability to increase its total lithium production within Chile in 2019.

Albemarle could reach a total production volume of 80,000 tpy of LCE in 2019, including tolling, from 64,000 tpy of LCE reached in 2018, if production issues fail to persist.

The company has been diversifying its lithium operations abroad and ramping up production at its subsidiary Jiangxi New Material and lithium-spodumene production at the Greenbushes mine in Western Australia, to keep expanding output outside of Chile.

At the same time, Albemarle is building a lithium hydroxide plant in two phases with a production capacity of up to 100,000 tpy in Kemerton in Western Australia, which should start commissioning by 2021. Albemarle has a joint venture with Mineral Resources for a 50% interest in all lithium mineral concentrate produced from the Wodgina mine in Western Australia.

Both companies agreed to build a lithium-hydroxide plant with an initial production capacity of 50,000 tpy that will be operational by 2022 and will use lithium concentrate produced from Wodgina.

Albemarle’s neighbor at the Salar de Atacama in Chile, SQM, is the second largest lithium producer in the world outside of China and so far in 2019, appears to be the lithium producer that could expand its current lithium output the most.

Although Corfo authorized the company to increase its lithium production by almost five-fold to 216,000 tpy by 2025, SQM’s current plan is to increase its lithium-carbonate production to 100,000 tpy by 2019 from the current 48,000-tpy level.

With expectations that it will produce over 60,000 tpy of LCE in 2019, SQM plans to stockpile 10,000 tonnes of lithium carbonate over the course of 2019. This change in market strategy demonstrates the company’s interest in keeping its supply chain flexible, so as not to flood the market while responding to the growing market demand.

SQM has also sought to diversify its lithium production overseas and has reached a joint venture with Kidman Resources for the exploration of Mount Holland in Western Australia. SQM plans to build a lithium hydroxide plant with a production capacity of 45,500 tpy, which will start commissioning by 2021.
After the top two producers outside of China comes Livent, the largest Argentinian producer of lithium compounds from brine, which operates at its Fenix site in the Salar del Hombre Muerto and doubled its battery-grade lithium-hydroxide capacity to 18,000 tpy in 2017.

The company expects a total lithium-hydroxide capacity of 30,000 tpy by 2019 and will expand beyond this level when customers require. Most recently, the company said it was looking at new lithium operations to expand production further.

The last, and newest, producer making lithium from brine outside of China is Orocobre, which operates its Olaroz brine project in Northern Argentina under a JV between Orocobre (66.5%), Toyota Tsusho Corp (25%) and Jujuy Energia y Mineria Sociedad del Estado (8.5%).

Orocobre produced 12,470 tpy of lithium carbonate in 2018 and aims to produce 14,000 tpy of lithium carbonate in 2019. The company will start the second stage of the expansion at Olaroz to produce 17,000 tpy of battery-grade lithium carbonate and 15,500 tpy of technical and industrial-grade lithium carbonate in the second half of 2020.

Orocobre and Toyota Tsusho hope to finalize the development of a 10,000-tpy lithium-hydroxide plant in Fukushima in Japan, which is scheduled to come online in 2019.

Chinese lithium producers
Not far behind Albemarle and SQM, and of equal importance, are Chinese Tianqi Lithium and Ganfeng Lithium, which have rapidly increased their size and influence in the global lithium market.

Tianqi Lithium has grown rapidly in the past few years, expanding its operations and influence across the lithium supply chain. The recent 23.77% acquisition of SQM’s shares demonstrates Tianqi’s intentions to grow globally and increase total lithium output to supply the developing battery industry in China, Japan and Korea.

Tianqi Lithium is one of the largest lithium producers in China, producing close to 50,000 tpy of LCE in 2018 and aiming to boost total LCE production capacity up to 58,800 tpy by the end of 2019. Tianqi will source some of its raw materials from the Greenbushes mine - through its 51% ownership - and from the company’s brine operations in Zhabuye in Tibet.

Tianqi is also developing the Kwinana lithium-hydroxide plant in Western Australia to reach a total capacity of 48,000 tpy of battery-grade lithium hydroxide in two stages of 24,000 tpy each. Stage 1 of Kwinana’s production should start by the second half of 2019 with stage 2 set to start in the second half of 2020.

Ganfeng Lithium has similarly increased its global standing in recent years. In early April 2019, Ganfeng increased its ownership of the Cauchari-Olaroz JV lithium project in Northern Argentina with Lithium Americas to 50%. This project will initially produce 25,000 tpy of lithium carbonate after production starts in the second half of 2020.

Concurrently, Ganfeng has a 10-year supply agreement with Australia Pilbara Minerals for 160,000 tpy of lithium spodumene.

Ganfeng is looking to increase its total capacity of LCE to 100,000 tpy by 2020 from 79,000 tpy of LCE currently to fulfil the diverse supply agreements in place with, most recently, the Volkswagen Group, Tesla and BMW.

China’s Sichuan Yahua Lithium and Shandong Ruifu are important as well, they have been ramping up total output in China in past years by using the Australian hard-rock concentrate as a raw material source.

Sichuan Yahua Lithium is working to expand its production to 22,000 tpy of LCE in 2019 from 12,000 tpy of LCE in 2018. Shandong Ruifu plans to expand total LCE output up to 25,000 tpy by the end of 2019.

Lithium hard rock miners

Used as the raw material in lithium chemicals such as lithium carbonate and lithium hydroxide, the hard rock extracted from mines in Australia has changed the lithium industry from being brine dependent into using lithium hard rock concentrate.

Lithium hard rock concentrate - less affected by rainfall or snow and able to offer lithium carbonate and hydroxide quality consistency – is also known as spodumene concentrate and has become an important raw material for most Chinese producers while showcasing that lithium hard-rock mines have the capacity to increase production faster than lithium brine operations.

Roughly, 7 to 8 tonnes of min 6% spodumene concentrate equals 1 tonne of lithium carbonate or hydroxide, Australia miners told Fastmarkets.

Currently, most of the hard-rock lithium mines in the world are located in Western Australia, which is close to China where most of the world’s conversion capacity is installed.

The world’s largest lithium hard-rock mine is Greenbushes in Western Australia operated by Talison Lithium, which is jointly owned by Tianqi (51%) and Albemarle (49%). The mine should produce the equivalent of 100,000 tpy of LCE in 2019 while it aims to further increase production.

The second largest lithium operating mine is Mount Marion lithium mine, the 50-50% JV between Ganfeng and Mineral Resources. The mine made its first shipment of 15,000 tonnes of spodumene concentrate in February 2017 before producing 418,711 tpy of spodumene concentrate in 2018.

Ganfeng and Mineral Resources have plans to build a lithium-hydroxide plant with a nameplate capacity of 20,000-25,000 tpy in Kalgoorlie for the production of battery-grade lithium hydroxide compounds using the Mount Marion output.

Galaxy Resources produces spodumene at its Mount Cattlin mine in Ravensthorpe in Western Australia. The company produced 150,000 tpy of lithium spodumene concentrate in 2018 and aims to produce 180,000-210,000 tpy of lithium spodumene concentrate in 2019.

In the Pilbara region in Western Australia, Pilbara Minerals made its first shipment of lithium spodumene concentrate from its Pilgangoora Lithium Tantalum project on October 2, 2018, producing 47,859 tonnes of spodumene concentrate in the final quarter of 2018.

Stage 1 of Pilgangoora aims to produce 330,000 tpy of min 6% spodumene concentrate, running from June 2018 to 2020. Moreover, stage 2 will start commissioning and expansion in the first quarter of 2020 to increase the company’s total output to 850,000 tpy of 6% spodumene concentrate.

Also located in the Pilbara region, Altura Mining’ Pilgangoora Lithium stage 1 began at the end of 2018 with a nameplate capacity of 220,000 tpy of lithium spodumene concentrate, which could take up to three years to fully ramp up.

Stage 2 of the project will determine optimal mine output and aim to increase production to 450,000 tpy of lithium spodumene concentrate.

Also in Western Australia, Alliance Mineral Assets’ Bald Hill Mine operation started stage 1 lithium concentrate production in March 2018 with an aim to produce at a full capacity of 180,000 tpy of spodumene concentrate in 2019 and an increased output of 240,000 tpy in 2020.

In Brazil, the AMG Lithium Mibra Mine started production in 2018 with a planned production guidance of 90,000 tpy of spodumene concentrate and an option to expand to 180,000 tpy by the end of 2020.

This article will also be published in the upcoming issue of the Fastmarkets IM magazine.

William Adams

william.adams@fastmarkets.com

Martim Facada

martim.facada@fastmarkets.com

Published

William Adams

Martim Facada

April 11, 2019

11:00 GMT

London