Story first appeared in The Detroit News.
Despite China's emergence as an economic power and all the talk about how America has become a service economy, U.S. manufacturing is alive and well.
Judging by impressive gains in productivity and America's high-tech advantage, manufacturing in the United States has shown surprising resiliency. While the nation's overall economy grew only 1.7 percent last year, the manufacturing sector of U.S. industrial production increased at almost three times that rate, rising 4.7 percent.And manufacturing output in the Midwest rose by a robust 8.4 percent last year, indicating that America's manufacturing heartland is leading the industrial comeback.
But there is a fly in the ointment.In recent years, the United States has become dangerously dependent on China Sourcing and imports of raw materials that are needed to keep our economy moving.U.S. manufacturers are now more than 40 percent dependent on imports of many commodity and rare earth metals.For example, import reliance on gallium is at 94 percent, cobalt and titanium 81 percent, chromium 56 percent, silicon 44 percent and nickel 43 percent. These minerals are critical for defense and energy technologies and many high-tech consumer products.
Consider nickel, which is needed in the manufacture of stainless steel and electricity storage batteries, among other things.Oregon has the only U.S. mine producing nickel.Almost all of the domestic nickel comes from recycling alloys containing nickel.Now, thanks to a $100-million-plus investment, the Eagle nickel mine in Michigan's Upper Peninsula is expected to open in 2014, producing 16,000 tons of nickel and 10,000 tons of copper.
But we are also heavily dependent on China Sourcing and other foreign countries for 19 minerals, mainly rare earth minerals.Few of us are familiar with rare earth minerals, such as neodymium, samarium and dysprosium, but they are crucial in the manufacture of jet fighter engines, antimissile defense systems, night vision goggles and smart bombs, among other advanced military systems.And they have many other high-tech applications — computers, cell phones and flat-panel televisions, for example.Additionally, they are essential to petroleum refining, automotive catalytic converters, wind turbines and electric vehicles.Fortunately, a rare earth mine in California is now producing some minerals.But it alone can't meet the fast-growing demand for the metals.
This foreign dependency presents a conundrum for policymakers, because unlike the 12-member multinational OPEC cartel that supplies much of our oil, the foreign production of rare earth minerals is concentrated almost entirely in a single country with its own rising industrial demand: China.
China's leverage on the global market for rare earth minerals has unnerved many of its neighbors and trading partners: American manufacturers — including many in Michigan — are understandably worried about supply disruptions like the one in 2007 when China halted shipments of rare earth metals to a U.S. petroleum refining company for so long that it led to concerns that the cutoff might cause a nationwide gasoline shortage.In 2010, following a skirmish over fishing rights in the East China Sea, China cut off shipments of certain rare earth minerals to Japan.
And our industries pay a steep price for China's near monopoly position on many critical resources. Costs soared two years ago after China reduced its export quotas for the minerals.For example, the price of lanthanium oxide, a mineral used in refining petroleum, rose from $5 per kilogram in early 2010 to $35 per kilogram by mid-year and $140 per kilogram in June 2011.Such market power, if not addressed soon and effectively, could harm the U.S. economy and national security.
To ensure reliable access to critical minerals, the U.S. government needs to alter its domestic policies so that our country can become more self-reliant and prevent the export of production and jobs overseas.We could produce more of our commodity and rare earth minerals here at home if not for a cumbersome permitting process that requires redundant reviews at federal and state levels, often by multiple agencies. In fact, it now takes five to 10 years to obtain a mining permit.
An estimated 13 percent of the world's rare earth reserves are in the United States, mainly on government land in the Western states that's overseen by the Bureau of Land Management.By one estimate, North American rare earth deposits could produce more than double the amount U.S. industries use today and enough to allow self-sufficiency even as the demand for rare earth metals continues to grow.
Today, by controlling much of the rare-earth mineral production, China is able to place U.S. industries at a disadvantage.Predictably, this has forced a number of U.S. manufacturers that are heavily dependent on rare earth minerals to move their operations to China, driving production and jobs abroad.
There is really only one foolproof remedy available that would effectively reduce our dependence on rare-earth imports: we need to streamline the U.S. permitting process so that it accomplishes the dual objectives of minimizing the environment impact of mining and at the same time meeting our nation's advanced manufacturing and defense needs.
Congress can help get the process started by approving legislation to spur investment in our nation's vast mineral resources.
For more business related news, visit the Peak News Room blog.
Showing posts with label Mining. Show all posts
Showing posts with label Mining. Show all posts
Friday, April 6, 2012
Monday, October 18, 2010
BHP, Rio Drop Iron Ore Venture After Opposition From Regulators
Bloomberg
BHP Billiton Ltd. and Rio Tinto Group abandoned a plan to create the world’s largest iron-ore exporter after opposition from regulators in Europe and Asia.
“It has become increasingly apparent that regulatory approvals of the joint venture are unlikely to be achieved,” Melbourne-based BHP said today in a statement. Rio confirmed the plan to combine the two companies’ Australian operations was dropped in a separate statement.
BHP and Rio, the world’s largest and third-largest mining companies, would have saved at least $10 billion in costs by combining their mines, railroads and ports in the remote Pilbara region. Gains in iron ore prices in the 16 months since the deal was proposed mean London-based Rio may benefit more than BHP from its collapse because it produces more of the steelmaking raw material, according to Pengana Capital Ltd.
“Rio has got more to gain from ending this deal because they have more infrastructure alternatives,” said Tim Schroeders who helps manage about $1 billion at Pengana in Melbourne, including BHP and Rio shares. The infrastructure “flexibility that Rio has was something that BHP wanted to leverage into in terms of fast tracking expansions. Rio now holds the winning hand.”
Rio’s London traded shares gained 0.2 percent on Oct. 15 and BHP’s declined 0.7 percent before the Australian stock market opened today.
Antitrust authorities in Germany and Japan last week said they opposed the deal. The European Commission was also likely to raise formal objections, two people familiar with the plan said last week. The companies were informed of the results of the commission’s preliminary investigation on Oct. 15.
‘Substantial’ Remedies
“The full value of the synergies on offer from a 50:50 joint venture was a prize well worth pursuing,” Rio’s Chief Executive Officer Tom Albanese, 53, said today. Some regulators wanted “substantial” remedies that were unacceptable, Rio said.
BHP had agreed to pay Rio $5.8 billion to form the venture. Neither company will pay the $276 million break fee, they said.
The two companies agreed on the deal on June 5, 2009, when Rio, battling high levels of debt, scrapped an investment from Aluminum Corp. of China in favor of raising $21 billion from a share sale and the joint venture. The deals allowed Rio to slash debt without selling bonds and stakes in its largest mines, defusing a backlash from shareholders and politicians.
Plan B
“The imperative at the time of the deal given Rio’s balance sheet problems is not really an issue at this point in time given the strong commodity price environment,” Schroeders said.
The two companies have already agreed on a so-called Plan B, involving sharing infrastructure and blending ore, Sanford C. Bernstein Ltd. analyst Paul Galloway wrote in an Oct. 15 report. BHP probably has more to gain from such an arrangement, according to the report.
BHP’s Chief Executive Marius Kloppers, 48, abandoned a $66 billion hostile bid for Rio in 2008, citing Rio’s high level of debt and economic uncertainty. A Pilbara joint venture had been studied in 1999 and was a key driver behind BHP’s hostile takeover bid for Rio, Citigroup Inc. said in a May 2009 report.
“The large synergies from combining our West Australian iron ore assets with Rio Tinto’s have caused us to persevere in seeking to obtain regulatory approvals,” Kloppers said today.
“It has become increasingly apparent that regulatory approvals of the joint venture are unlikely to be achieved,” Melbourne-based BHP said today in a statement. Rio confirmed the plan to combine the two companies’ Australian operations was dropped in a separate statement.
BHP and Rio, the world’s largest and third-largest mining companies, would have saved at least $10 billion in costs by combining their mines, railroads and ports in the remote Pilbara region. Gains in iron ore prices in the 16 months since the deal was proposed mean London-based Rio may benefit more than BHP from its collapse because it produces more of the steelmaking raw material, according to Pengana Capital Ltd.
“Rio has got more to gain from ending this deal because they have more infrastructure alternatives,” said Tim Schroeders who helps manage about $1 billion at Pengana in Melbourne, including BHP and Rio shares. The infrastructure “flexibility that Rio has was something that BHP wanted to leverage into in terms of fast tracking expansions. Rio now holds the winning hand.”
Rio’s London traded shares gained 0.2 percent on Oct. 15 and BHP’s declined 0.7 percent before the Australian stock market opened today.
Antitrust authorities in Germany and Japan last week said they opposed the deal. The European Commission was also likely to raise formal objections, two people familiar with the plan said last week. The companies were informed of the results of the commission’s preliminary investigation on Oct. 15.
‘Substantial’ Remedies
“The full value of the synergies on offer from a 50:50 joint venture was a prize well worth pursuing,” Rio’s Chief Executive Officer Tom Albanese, 53, said today. Some regulators wanted “substantial” remedies that were unacceptable, Rio said.
BHP had agreed to pay Rio $5.8 billion to form the venture. Neither company will pay the $276 million break fee, they said.
The two companies agreed on the deal on June 5, 2009, when Rio, battling high levels of debt, scrapped an investment from Aluminum Corp. of China in favor of raising $21 billion from a share sale and the joint venture. The deals allowed Rio to slash debt without selling bonds and stakes in its largest mines, defusing a backlash from shareholders and politicians.
Plan B
“The imperative at the time of the deal given Rio’s balance sheet problems is not really an issue at this point in time given the strong commodity price environment,” Schroeders said.
The two companies have already agreed on a so-called Plan B, involving sharing infrastructure and blending ore, Sanford C. Bernstein Ltd. analyst Paul Galloway wrote in an Oct. 15 report. BHP probably has more to gain from such an arrangement, according to the report.
BHP’s Chief Executive Marius Kloppers, 48, abandoned a $66 billion hostile bid for Rio in 2008, citing Rio’s high level of debt and economic uncertainty. A Pilbara joint venture had been studied in 1999 and was a key driver behind BHP’s hostile takeover bid for Rio, Citigroup Inc. said in a May 2009 report.
“The large synergies from combining our West Australian iron ore assets with Rio Tinto’s have caused us to persevere in seeking to obtain regulatory approvals,” Kloppers said today.
Monday, August 23, 2010
S&P 500's Refusal to Decline Reflected in Most-Expensive Commodity Stocks
Bloomberg
For all the signs of a U.S. slowdown, American stocks are up 4 percent in the third quarter, led by commodity producers that have been trading at the most expensive levels since 2004.
The 32 mining companies, seed-makers and chemical suppliers in the Standard & Poor’s 500 Index gained 10 percent since the end of June, pushing the average price to 17.4 times annual profits, the highest level of any industry, data compiled by Bloomberg show. Premium valuations for companies from Dow Chemical Co. to Allegheny Technologies Inc. preceded rallies in the past as demand for raw materials signaled economic growth.
Optimism in commodity stocks runs counter to reports last week showing U.S. jobless claims rose to the highest level since November and housing starts trailed economists’ estimates. David Rosenberg, the chief economist for Gluskin Sheff & Associates Inc., says the probability of the second recession in three years is greater than 50 percent.
“If the market really believed the double-dip story, which I don’t think the stock market believes, materials stocks would not be doing this well, that’s for certain,” said Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, which oversees more than $30 billion. “The interesting thing is that materials would do as well as they did. I would have expected some softening of commodity prices.”
Weekly Loss
Basic-resources stocks were the biggest gainers today in European trading, led by BHP Billiton Ltd., amid speculation that a proposed mining tax in Australia will be scrapped or diluted after the ruling Labor party failed to win a majority at the weekend election.
The S&P 500 rose 0.7 percent as of 9:42 a.m. in New York.
The S&P 500 slipped 0.7 percent to 1,071.69 last week, falling to the lowest level in a month and bringing its 2010 loss to 4 percent. Commodity suppliers gained 0.6 percent after Melbourne-based BHP Billiton Ltd. bid $40 billion for Potash Corp. of Saskatchewan Inc. More than $165 billion in takeovers of raw-materials producers has been announced this year, the most since 2007, according to data compiled by Bloomberg.
Mining and chemical companies in the S&P 500 are about 22 percent more expensive than the index based on price-earnings ratios using profits over the last 12 months, data compiled by Bloomberg show. The industry has been the most expensive relative to income since June, data compiled by Bloomberg show.
Economy Proxy
Before 2009, when the S&P 500 gained 24 percent for its biggest rally in six years, the last time metals and mining shares traded so far above the index was in 2004, data compiled by Bloomberg show. That was just after the start of a five-year rally in which the S&P 500 doubled. They commanded a bigger premium in 1994, before the S&P 500 tripled over six years, the data show.
“It’s an important leading indicator,” said Bruce McCain, who oversees $25 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland. “The strength we see in some of those is good reassurance there is more underlying economic strength than had been feared.”
Money managers at JPMorgan Chase & Co. and Russell Investments are confident about mining stocks even as the U.S. slows because they expect China to spur demand. The American economy’s growth rate in the second quarter is forecast to be revised down to 1.4 percent on Aug. 27 from the last estimate of 2.4 percent on July 30, according to a survey of economists.
‘Growth Story’
While Chinese GDP slowed between March and June, the rate of expansion remained above 10 percent for a third quarter, data from the National Bureau of Statistics showed. It’s projected to increase by 10 percent in 2010 and 8.9 percent next year, according to the median estimate of economists surveyed by Bloomberg.
“We are trying to take advantage of a very real global growth story” with investments in materials companies, said Stephen Wood, the New York-based chief market strategist for Russell Investments, which manages $140 billion. “It’s not a brisk one, but it’s a real one. A double-dip recession is a low- probability scenario.”
The Reuters/Jefferies CRB Index of 19 raw materials has gained 3.3 percent since the end of June, led by wheat, which climbed 41 percent as droughts in exporting countries including Russia threatened to reduce supplies. Sugar advanced 24 percent as delays worsened at ports in Brazil, the world’s biggest exporter. Copper increased 11 percent and cotton rallied 9 percent, according to data compiled by Bloomberg.
‘Growth Dynamics’
Rising materials prices and high valuations for producers say little about prospects for growth in the U.S. and Europe, Rosenberg said in a telephone interview from Toronto. The economist was among the first to predict the 2008 recession that sent the S&P 500 down 38 percent, propelling him to the No. 2 ranking by Institutional Investor magazine that year.
“The basic materials complex is no longer just a cyclical play, it’s also a play on secular growth dynamics as it pertains to the most dynamic part of the global economy right now, which is emerging Asia,” Rosenberg said. “It’s commanding a premium relative to how it’s traded in the past.”
A 1.4 percent U.S. growth rate in the second quarter would be the slowest since the economy contracted in last year’s third quarter. Forecasts for the second half and next year are deteriorating. The median estimate of 55 economists surveyed by Bloomberg is for U.S. GDP to increase by 3 percent in 2010 and 2.8 percent in 2011, down from 3.2 percent and 3.1 percent in May.
TIPS Spread
Initial jobless claims rose by 12,000 to 500,000 in the week ended Aug. 14, exceeding all estimates of economists surveyed by Bloomberg, the Labor Department said Aug. 19. Work began on 546,000 houses at an annual rate last month, fewer than the 560,000 median forecast of economists surveyed by Bloomberg, Commerce Department figures showed on Aug. 17.
The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices, narrowed last week to 1.56 percentage points, the smallest gap since September 2009, from a high of 2.49 percentage points in January, data compiled by Bloomberg show. Yields on two-year Treasury notes last week declined to the lowest level on record, data compiled by Bloomberg show.
Concern about deflation is higher than at any time since November 2002, equity derivatives strategists at Citigroup Inc. wrote in an Aug. 16 report. U.S. stocks had their biggest one- day drop in three weeks on Aug. 11 after Federal Reserve policy makers led by Chairman Ben S. Bernanke said the pace of economic recovery “slowed in recent months.”
July Rally
“Most companies borrow for their businesses,” said Olivier Sarfati, head of equity trading strategies at Citigroup Inc. in New York. “With deflation, the price of whatever you’re selling decreases, but your debt doesn’t. It makes debt difficult to repay, and just repaying debt takes all your profits.”
Stocks surged in July as companies in the benchmark measure of U.S. shares topped the average analyst profit projection by 10 percent. S&P 500 earnings increased 49 percent during the second quarter from the year-earlier period, based on reports by the 484 companies through Aug. 20, and the index jumped 6.9 percent.
The third straight increase in profits followed a record nine-quarter slump, data compiled by Bloomberg show. The recovery is forecast to produce earnings gains of 36 percent this year and 16 percent next year, according to forecasts compiled by Bloomberg. Raw-materials producers are projected to help lead the increase, with net income gaining 67 percent in 2010 and 26 percent in 2011, the data show.
Market Multiple
Dow Chemical, the largest U.S. chemical maker, trades at about 17.6 times earnings over the past 12 months, compared with a 14.2 multiple for the S&P 500. It’s among the materials stocks Morgan Stanley recommends, said David Darst, the New York-based chief investment strategist for the firm’s brokerage clients. In March 2003, the valuation was almost five times the market’s.
Allegheny Technologies, a producer of titanium, nickel and steel held in Russell Investments’ U.S. Core Equity Fund, trades at 46 times trailing earnings. Its premium peaked in March 2003 at nearly 8 times the index’s multiple.
“We’re still in this period where the redeployment of capital at the business level is very strong, which means we’re going to increase utilization of materials very heavily at a time where people are very bought into the notion of not necessarily a double-dip recession, but slower economic growth,” said Kenneth Fisher, the chief executive officer of Fisher Investments Inc., which oversees $35 billion from Woodside, California. “That’s a big argument for overweighting materials across the board.”
The 32 mining companies, seed-makers and chemical suppliers in the Standard & Poor’s 500 Index gained 10 percent since the end of June, pushing the average price to 17.4 times annual profits, the highest level of any industry, data compiled by Bloomberg show. Premium valuations for companies from Dow Chemical Co. to Allegheny Technologies Inc. preceded rallies in the past as demand for raw materials signaled economic growth.
Optimism in commodity stocks runs counter to reports last week showing U.S. jobless claims rose to the highest level since November and housing starts trailed economists’ estimates. David Rosenberg, the chief economist for Gluskin Sheff & Associates Inc., says the probability of the second recession in three years is greater than 50 percent.
“If the market really believed the double-dip story, which I don’t think the stock market believes, materials stocks would not be doing this well, that’s for certain,” said Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, which oversees more than $30 billion. “The interesting thing is that materials would do as well as they did. I would have expected some softening of commodity prices.”
Weekly Loss
Basic-resources stocks were the biggest gainers today in European trading, led by BHP Billiton Ltd., amid speculation that a proposed mining tax in Australia will be scrapped or diluted after the ruling Labor party failed to win a majority at the weekend election.
The S&P 500 rose 0.7 percent as of 9:42 a.m. in New York.
The S&P 500 slipped 0.7 percent to 1,071.69 last week, falling to the lowest level in a month and bringing its 2010 loss to 4 percent. Commodity suppliers gained 0.6 percent after Melbourne-based BHP Billiton Ltd. bid $40 billion for Potash Corp. of Saskatchewan Inc. More than $165 billion in takeovers of raw-materials producers has been announced this year, the most since 2007, according to data compiled by Bloomberg.
Mining and chemical companies in the S&P 500 are about 22 percent more expensive than the index based on price-earnings ratios using profits over the last 12 months, data compiled by Bloomberg show. The industry has been the most expensive relative to income since June, data compiled by Bloomberg show.
Economy Proxy
Before 2009, when the S&P 500 gained 24 percent for its biggest rally in six years, the last time metals and mining shares traded so far above the index was in 2004, data compiled by Bloomberg show. That was just after the start of a five-year rally in which the S&P 500 doubled. They commanded a bigger premium in 1994, before the S&P 500 tripled over six years, the data show.
“It’s an important leading indicator,” said Bruce McCain, who oversees $25 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland. “The strength we see in some of those is good reassurance there is more underlying economic strength than had been feared.”
Money managers at JPMorgan Chase & Co. and Russell Investments are confident about mining stocks even as the U.S. slows because they expect China to spur demand. The American economy’s growth rate in the second quarter is forecast to be revised down to 1.4 percent on Aug. 27 from the last estimate of 2.4 percent on July 30, according to a survey of economists.
‘Growth Story’
While Chinese GDP slowed between March and June, the rate of expansion remained above 10 percent for a third quarter, data from the National Bureau of Statistics showed. It’s projected to increase by 10 percent in 2010 and 8.9 percent next year, according to the median estimate of economists surveyed by Bloomberg.
“We are trying to take advantage of a very real global growth story” with investments in materials companies, said Stephen Wood, the New York-based chief market strategist for Russell Investments, which manages $140 billion. “It’s not a brisk one, but it’s a real one. A double-dip recession is a low- probability scenario.”
The Reuters/Jefferies CRB Index of 19 raw materials has gained 3.3 percent since the end of June, led by wheat, which climbed 41 percent as droughts in exporting countries including Russia threatened to reduce supplies. Sugar advanced 24 percent as delays worsened at ports in Brazil, the world’s biggest exporter. Copper increased 11 percent and cotton rallied 9 percent, according to data compiled by Bloomberg.
‘Growth Dynamics’
Rising materials prices and high valuations for producers say little about prospects for growth in the U.S. and Europe, Rosenberg said in a telephone interview from Toronto. The economist was among the first to predict the 2008 recession that sent the S&P 500 down 38 percent, propelling him to the No. 2 ranking by Institutional Investor magazine that year.
“The basic materials complex is no longer just a cyclical play, it’s also a play on secular growth dynamics as it pertains to the most dynamic part of the global economy right now, which is emerging Asia,” Rosenberg said. “It’s commanding a premium relative to how it’s traded in the past.”
A 1.4 percent U.S. growth rate in the second quarter would be the slowest since the economy contracted in last year’s third quarter. Forecasts for the second half and next year are deteriorating. The median estimate of 55 economists surveyed by Bloomberg is for U.S. GDP to increase by 3 percent in 2010 and 2.8 percent in 2011, down from 3.2 percent and 3.1 percent in May.
TIPS Spread
Initial jobless claims rose by 12,000 to 500,000 in the week ended Aug. 14, exceeding all estimates of economists surveyed by Bloomberg, the Labor Department said Aug. 19. Work began on 546,000 houses at an annual rate last month, fewer than the 560,000 median forecast of economists surveyed by Bloomberg, Commerce Department figures showed on Aug. 17.
The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices, narrowed last week to 1.56 percentage points, the smallest gap since September 2009, from a high of 2.49 percentage points in January, data compiled by Bloomberg show. Yields on two-year Treasury notes last week declined to the lowest level on record, data compiled by Bloomberg show.
Concern about deflation is higher than at any time since November 2002, equity derivatives strategists at Citigroup Inc. wrote in an Aug. 16 report. U.S. stocks had their biggest one- day drop in three weeks on Aug. 11 after Federal Reserve policy makers led by Chairman Ben S. Bernanke said the pace of economic recovery “slowed in recent months.”
July Rally
“Most companies borrow for their businesses,” said Olivier Sarfati, head of equity trading strategies at Citigroup Inc. in New York. “With deflation, the price of whatever you’re selling decreases, but your debt doesn’t. It makes debt difficult to repay, and just repaying debt takes all your profits.”
Stocks surged in July as companies in the benchmark measure of U.S. shares topped the average analyst profit projection by 10 percent. S&P 500 earnings increased 49 percent during the second quarter from the year-earlier period, based on reports by the 484 companies through Aug. 20, and the index jumped 6.9 percent.
The third straight increase in profits followed a record nine-quarter slump, data compiled by Bloomberg show. The recovery is forecast to produce earnings gains of 36 percent this year and 16 percent next year, according to forecasts compiled by Bloomberg. Raw-materials producers are projected to help lead the increase, with net income gaining 67 percent in 2010 and 26 percent in 2011, the data show.
Market Multiple
Dow Chemical, the largest U.S. chemical maker, trades at about 17.6 times earnings over the past 12 months, compared with a 14.2 multiple for the S&P 500. It’s among the materials stocks Morgan Stanley recommends, said David Darst, the New York-based chief investment strategist for the firm’s brokerage clients. In March 2003, the valuation was almost five times the market’s.
Allegheny Technologies, a producer of titanium, nickel and steel held in Russell Investments’ U.S. Core Equity Fund, trades at 46 times trailing earnings. Its premium peaked in March 2003 at nearly 8 times the index’s multiple.
“We’re still in this period where the redeployment of capital at the business level is very strong, which means we’re going to increase utilization of materials very heavily at a time where people are very bought into the notion of not necessarily a double-dip recession, but slower economic growth,” said Kenneth Fisher, the chief executive officer of Fisher Investments Inc., which oversees $35 billion from Woodside, California. “That’s a big argument for overweighting materials across the board.”
Thursday, May 20, 2010
San Francisco Startup to Mine Lithium for Batteries
Mining Weekly
Many new lithium entrants as electric cars, consumer goods drive demand
When the global recession spilled like hot coffee on the collective lap of consumers worldwide, sales of luxury goods spiralled downwards, dragging lithium demand with them.
The lithium market is dominated by industrial applications such as ceramics and glass, laptop and cellphone batteries, greases, aluminium production, air treatments, thermoplastic production, and that newest of automotive thrills, the electric car.
Demand for most of these applications dimmed in 2009 and, consequently, lithium uptake also decreased, says US Geological Survey beryllium, gallium and lithium commodity specialist Brian Jaskula.
“There is currently an oversupply of lithium due to the economic downturn that began in 2008,” he says.
In 2009, worldwide lithium production decreased some 30% from that of 2008, while worldwide lithium consumption decreased by 15% to 20%.”
Despite the global economy now inching out of intensive care, as well as burgeoning demand from electric vehicle developers and for laptop computer batteries, Jaskula believes it will take some time for the lithium market to return to 2008 levels.
That said, lithium-ion batteries used in transportation applications provide hope for a sturdy recovery, as it is set to be the fastest-growing end use for lithium during the next decade, he adds.
SQM (Sociedad Quimica y Minera), of Chile, currently the largest lithium producer in the world, and Roskill Information Services both estimate this end use to grow at a compound annual growth rate of more than 40% during the next decade.
However, warns Jaskula, “even with this huge growth rate expected in the trans- portation area, lithium demand is not anticipated to outstrip supply by 2020, because all of the current lithium producers have a series of lithium capacity expansion plans in place that should meet any demand scenario”.
SUPPLY AND DEMAND
The list of global lithium producers is topped by Chile (45%), followed by Australia (23%), Argentina and China, leaving the fifth spot to the US, where there is currently only one lithium producer.
Lithium for batteries comes mainly from South America and China, while lithium minerals used for the glass and ceramics industry are sourced predominately from Australia.
The four dominant corporate producers are SQM (Chile), FMC (Argentina), Chemetall (Chile) and Talison Lithium (Australia), with several projects under development by emerging lithium miners.
In a January 2010 presentation, SQM said that the recession-hit lithium capacity utilisation rate worldwide was only 57%, and that this was expected to increase to 66%, owing to demand recovery and other foreseen capacity expansions.
The worldwide utilisation rate was expected to remain lower than 75% until 2020 – con-sidering only current producers’ capacity expansion plans.
SQM believed the lithium market would remain well supplied over the next 15 years by the current lithium producers.
By including the capacity of potential new entrants, SQM said, the worldwide lithium capacity utilisation rate would remain below 55% until 2020.
In such a scenario, SQM warned, the lithium market would move to a situation of oversupply over the next 20 years.
However, says Jaskula, “there are others in the industry that believe Western-based lithium analysts have completely under- estimated the potential lithium demand from Asia, especially China, which may provide lucrative markets for emerging lithium producers”.
Jaskula says the official energy policy in China is that 10% of cars will be emission-free electric vehicles by 2013, and 20% of power will come from renewable resources by 2020. (To support renewable energy, battery storage is necessary, and batteries require lithium.)
“It was projected that there will be 80- million electric two-wheeled vehicles worldwide (mostly in Asia) by 2016,” notes Jaskula.
Well-entrenched lithium-miner Talison Lithium agrees with Jaskula and SQM on where demand will come from, but CEO Peter Oliver notes that “everyone has a different forecast for how demand will grow”.
Talison Lithium mines and processes lithium-bearing mineral spodumene at Green-bushes, near Perth, in Western Australia. (The shareholders of Talison withdrew a proposed initial public offering in December owing to weak market conditions leading up to Christmas and year-end.)
Roskill Information Services estimated lithium supply in 2008 at about 121 364 t lithium carbonate equivalent (LCE), says Oliver.
Consultants are forecasting 10% to 20% penetration rates by 2020 for electric vehicles and hybrid electric vehicles.
This could represent an increase in demand of up to 286 000 t LCE.
“Therefore, demand for lithium is expected to grow,” says Oliver. “However, the rate of increase in demand depends entirely upon what assumptions are used for rates of growth in energy storage systems and electric vehicles.”
Major automotive manufacturers are currently tooling up for the mass production of hybrid and electric vehicles, he adds.
Japanese vehicle manufacturer Nissan has started taking orders for its Leaf electric car.
Another Japanese manufacturer, Mitsubishi, has announced that it is lowering the price of the Mitsubishi iMiev electric car to match the pricing of the Nissan Leaf. The company has also announced that it intends to increase iMiev production to meet demand.
The first electric vehicles are also to hit US streets later this year.
Tru Group president Edward Anderson says that lithium use in batteries has been one of the major drivers of lithium demand since the rechargeable lithium-ion battery was invented in the early nineties, with the use of these rechargeable batteries in consumer electronics such as cell phones and laptops key to much of the growth since 2002.
Batteries accounted for about 14% of total lithium consumption in 2007.
“Further global proliferation of consumer electronics and the potential for electric vehicle batteries will push this proportion to almost 40% by 2020,” says Anderson.
He believes electric car battery use will start to take off in 2015, which will influence lithium consumption sharply.
However, should there indeed be a healthy uptake in demand for these electric vehicles, it does not necessarily ensure an easy entry for emerging lithium producers.
Oliver believes that the four current lithium producers have each been in production for more than 20 years, and that they all have the ability to expand their current production capacity to meet demand forecasts.
For example, Talison expanded its production capacity and output during 2009, and has plans to further increase production over the next few years.
“None of the development projects currently being promoted have completed development, permitting, financing, construction or commissioning. Nor have any of these projects fully developed the sales, marketing and distribution networks necessary to sell their products. As with any development project, there are con- siderable risks associated with development, permitting, financing, construction and commissioning, and there is no guarantee that any of these development projects will achieve commercial production.
“If some of these development projects are successful, they will contribute to supply,” says Oliver.
Jaskula waves a red flag on a possible over-supply-price-pressure scenario.
He warns that, if some of the development projects currently in the pipeline start producing lithium in the near term, adding to the production of lithium by current suppliers, then there may be an oversupply of lithium in the next decade.
This could drag down prices, potentially pushing some emerging producers out of the market “since the reduced lithium price may then be lower than their production costs”.
The lithium price is already under pressure.
Although demand dropped last year, 2009 lithium prices remained at levels similar to those of 2008, However, in late 2009, SQM announced that it would reduce its lithium prices by 20% for all contracts written in 2010.
Other lithium producers have not yet announced any price decreases for 2010, says Jaskula.
EMERGING PRODUCERS SAY ELECTRIC CAR IS ANSWER TO DEMAND
Canada Lithium, sporting an electric vehicle on its home page, is an emerging lithium producer.
Investor relations director Olav Svela says the company is upbeat about the demand for the commodity.
“Our own projections suggest supply will reach approximately 185 000 t in 2015, and that demand will likely be higher than that, given the projected growth in demand due to electric car and motorcycle batteries.
“We think that even with new producers coming on stream, or expansion by existing producers, lithium prices will rise.”
Svela says he believes the North American company’s work carries more importance than merely speaking to a pure supply-demand situation.
“US President Barack Obama says he does not want an Organisation of the Petroleum Exporting Countries-style cartel controlling the lithium industry. That is why we view our project as strategic to US interests because we are in mining-friendly Canada.”
Canada Lithium has initiated a prefeasibility study on its Quebec lithium project, near Val d’Or.
“We plan to be commissioning the mine and the processing plant by 2012,” says Svela.
Western Lithium is another emerging lithium producer and is developing its Nevada lithium deposit, in the US, to support what it says is “the new generation of hybrid/ electric vehicles”.
Western Lithium president Jay Chmelauskas tells Mining Weekly that the electric car has “the potential to completely change the nature of the lithium industry”.
He says a growing number of automotive industry leaders and analysts expect at least 10% to 25% of vehicles to be electrically powered in some way by 2020.
“An automotive market with 10% electric vehicles and 25% hybrid vehicles is estimated to require around 300 000 t of battery grade lithium carbonate per year,” says Chmelauskas.
“To put that into perspective, that is three times the size of the entire lithium market at present and 15 times the amount of battery-grade lithium carbonate that is being made today.
“We expect additional production to come on line over the next several years to match the development of the electric vehicle. Some of that is expected to come from current producers; however, we expect to see additional projects from outside the current geographic- ally concentrated supply base, which will also mitigate some of the political, social and geographical concentration present in the existing supply structure.”
Chmelauskas says Western Lithium’s project in Nevada, scheduled for full production in 2014, “is very well timed to take advantage of the projected demand upswing, and is particularly well suited to the just-in-time manufacturing culture of the automotive industry. Our production brings geographic diversity, is scalable and has significant flexibility in both quantity and quality.”
Western Lithium has one of the world’s largest known lithium deposits.
Developing it is a scalable project, with 8% of the historical deposit scheduled for development in the first stage and potential production of 27 700 t of lithium carbonate a year, and with a potential by-product of 115 000 t of potassium sulphate a year.
Cash operating costs are estimated at $1 967/t of lithium carbonate, after the potassium sulphate by-product credit.
“Following a positive scoping study released earlier this year, we are now proceeding with further engineering and pilot plant studies to advance the project to prefeasibility,” says Chmelauskas.
“We are in discussions with major lithium buyers to define product quality specifications, long-term supply requirements, and we expect to work with these groups through the piloting programme.”
SCRAMBLE TO SECURE SUPPLY
As of 2008 – the latest date available for worldwide consumption data – Roskill estimates that China and Europe are the largest consumers of lithium, each accounting for about 28% of total consumption.
Japan and North America (13%) are the next biggest consumers.
The US is the world’s largest importer of lithium carbonate, which it converts into downstream products, or into lithium hydroxide, for the export market.
As lithium is used in batteries for cellphones and laptops, and in new-generation electric cars and defence vehicles, it has morphed into a strategic source of energy.
“As with other commodities such as oil, iron-ore and copper, Japan and China are trying to secure long-term supply of other commodities important to their industrial growth,” notes Oliver.
“If the forecast growth in electric and hybrid vehicles materialises, then lithium may also become a strategic commodity.”
Chmelauskas believes that lithium is increasingly viewed as a strategic resource, and specifically to support the large-scale investments being made in the electric vehicle sector.
“Auto manufacturers and large-scale suppliers to that industry realise that the lithium-dependent sector of their end market – electric/hybrid automobiles, cell phones, computers – could easily generate revenues of $300-billion a year by 2020 and, so, are looking ahead to secure reliable supplies. We are starting to see countries and com- panies making investments today to ensure a stable and diversified supply of high- quality lithium.”
“Some countries do seem to be scrambling to secure supply,” concurs Jaskula. “Japan has struck deals with Argentina and possibly Bolivia. Canada is staking many mining claims, both inside and outside of Canada.”
He says last year turned out to be quite a boom year for lithium exploration, as there was a “huge increase in the number of potentially emerging lithium producers worldwide since 2008”.
As of January this year, more than a hundred companies are actively looking for lithium, with 68 of these companies being Canadian.
Jaskula says 144 new properties have been staked or claimed and are being evaluated.
“Some of these new companies are already fully financed and carry no debt, as their investors believe lithium may be the next gold rush.”
There are many companies staking claims in the US in anticipation of obtaining lithium from both mineral and brine sources, adds Jaskula.
Hectorite clays and geothermal brines are also being explored.
“Western Lithium is currently developing a lithium-rich hectorite clay operation and is making good progress.
“Geothermal brines located in southern California and throughout the world are generally rich in lithium, as well as other profitable industrial minerals. Simbol Mining is exploring the viability of obtaining lithium from geothermal waste streams generated by California’s Mammoth Lakes geothermal plant.”
In Africa, Zimbabwe, Niger, Namibia, Senegal and Côte d’Ivoire have known lithium deposits.
Jaskula is, perhaps, more cautious in his long-term market outlook than the various mining companies.
“There is more than enough economically obtainable lithium available in the short to medium term to meet the needs of lithium for hybrid and electric vehicles, no matter what the future demand is from these vehicles. In the long term, once recycling of lithium vehicle batteries has reached its cost-effective stride, approximately 20 to 30 years from now, the primary source of lithium from then on will be from recycling, and not from virgin lithium sources.
“Also, lithium battery chemistry development is in an extremely dynamic phase right now, with each new generation of battery chemistry offering more power, lower cost, greater driving distances, and lower lithium requirements than the [previous] battery chemistry.”
ALLOYS OFFER ANOTHER DEMAND BOON
Anderson expects another “breakthrough for lithium” to be the adoption of lithium metal in alloy production.
“An addition of 1% of lithium to aluminium results in a 3% reduction in weight and a 5% increase in stiffness. This offers quite an advantage in aerospace. We see these alloys have now already been adopted, even for structural uses in mainstream commercial aircraft like Airbus and Boeing.”
Anderson says this means the long-term lithium use in alloy production will become “quite major, following a strikingly similar adoption curve over time [to that for] batteries”.
He expects demand from this market to take up 10% of lithium supply in 2020.
The lithium market is dominated by industrial applications such as ceramics and glass, laptop and cellphone batteries, greases, aluminium production, air treatments, thermoplastic production, and that newest of automotive thrills, the electric car.
Demand for most of these applications dimmed in 2009 and, consequently, lithium uptake also decreased, says US Geological Survey beryllium, gallium and lithium commodity specialist Brian Jaskula.
“There is currently an oversupply of lithium due to the economic downturn that began in 2008,” he says.
In 2009, worldwide lithium production decreased some 30% from that of 2008, while worldwide lithium consumption decreased by 15% to 20%.”
Despite the global economy now inching out of intensive care, as well as burgeoning demand from electric vehicle developers and for laptop computer batteries, Jaskula believes it will take some time for the lithium market to return to 2008 levels.
That said, lithium-ion batteries used in transportation applications provide hope for a sturdy recovery, as it is set to be the fastest-growing end use for lithium during the next decade, he adds.
SQM (Sociedad Quimica y Minera), of Chile, currently the largest lithium producer in the world, and Roskill Information Services both estimate this end use to grow at a compound annual growth rate of more than 40% during the next decade.
However, warns Jaskula, “even with this huge growth rate expected in the trans- portation area, lithium demand is not anticipated to outstrip supply by 2020, because all of the current lithium producers have a series of lithium capacity expansion plans in place that should meet any demand scenario”.
SUPPLY AND DEMAND
The list of global lithium producers is topped by Chile (45%), followed by Australia (23%), Argentina and China, leaving the fifth spot to the US, where there is currently only one lithium producer.
Lithium for batteries comes mainly from South America and China, while lithium minerals used for the glass and ceramics industry are sourced predominately from Australia.
The four dominant corporate producers are SQM (Chile), FMC (Argentina), Chemetall (Chile) and Talison Lithium (Australia), with several projects under development by emerging lithium miners.
In a January 2010 presentation, SQM said that the recession-hit lithium capacity utilisation rate worldwide was only 57%, and that this was expected to increase to 66%, owing to demand recovery and other foreseen capacity expansions.
The worldwide utilisation rate was expected to remain lower than 75% until 2020 – con-sidering only current producers’ capacity expansion plans.
SQM believed the lithium market would remain well supplied over the next 15 years by the current lithium producers.
By including the capacity of potential new entrants, SQM said, the worldwide lithium capacity utilisation rate would remain below 55% until 2020.
In such a scenario, SQM warned, the lithium market would move to a situation of oversupply over the next 20 years.
However, says Jaskula, “there are others in the industry that believe Western-based lithium analysts have completely under- estimated the potential lithium demand from Asia, especially China, which may provide lucrative markets for emerging lithium producers”.
Jaskula says the official energy policy in China is that 10% of cars will be emission-free electric vehicles by 2013, and 20% of power will come from renewable resources by 2020. (To support renewable energy, battery storage is necessary, and batteries require lithium.)
“It was projected that there will be 80- million electric two-wheeled vehicles worldwide (mostly in Asia) by 2016,” notes Jaskula.
Well-entrenched lithium-miner Talison Lithium agrees with Jaskula and SQM on where demand will come from, but CEO Peter Oliver notes that “everyone has a different forecast for how demand will grow”.
Talison Lithium mines and processes lithium-bearing mineral spodumene at Green-bushes, near Perth, in Western Australia. (The shareholders of Talison withdrew a proposed initial public offering in December owing to weak market conditions leading up to Christmas and year-end.)
Roskill Information Services estimated lithium supply in 2008 at about 121 364 t lithium carbonate equivalent (LCE), says Oliver.
Consultants are forecasting 10% to 20% penetration rates by 2020 for electric vehicles and hybrid electric vehicles.
This could represent an increase in demand of up to 286 000 t LCE.
“Therefore, demand for lithium is expected to grow,” says Oliver. “However, the rate of increase in demand depends entirely upon what assumptions are used for rates of growth in energy storage systems and electric vehicles.”
Major automotive manufacturers are currently tooling up for the mass production of hybrid and electric vehicles, he adds.
Japanese vehicle manufacturer Nissan has started taking orders for its Leaf electric car.
Another Japanese manufacturer, Mitsubishi, has announced that it is lowering the price of the Mitsubishi iMiev electric car to match the pricing of the Nissan Leaf. The company has also announced that it intends to increase iMiev production to meet demand.
The first electric vehicles are also to hit US streets later this year.
Tru Group president Edward Anderson says that lithium use in batteries has been one of the major drivers of lithium demand since the rechargeable lithium-ion battery was invented in the early nineties, with the use of these rechargeable batteries in consumer electronics such as cell phones and laptops key to much of the growth since 2002.
Batteries accounted for about 14% of total lithium consumption in 2007.
“Further global proliferation of consumer electronics and the potential for electric vehicle batteries will push this proportion to almost 40% by 2020,” says Anderson.
He believes electric car battery use will start to take off in 2015, which will influence lithium consumption sharply.
However, should there indeed be a healthy uptake in demand for these electric vehicles, it does not necessarily ensure an easy entry for emerging lithium producers.
Oliver believes that the four current lithium producers have each been in production for more than 20 years, and that they all have the ability to expand their current production capacity to meet demand forecasts.
For example, Talison expanded its production capacity and output during 2009, and has plans to further increase production over the next few years.
“None of the development projects currently being promoted have completed development, permitting, financing, construction or commissioning. Nor have any of these projects fully developed the sales, marketing and distribution networks necessary to sell their products. As with any development project, there are con- siderable risks associated with development, permitting, financing, construction and commissioning, and there is no guarantee that any of these development projects will achieve commercial production.
“If some of these development projects are successful, they will contribute to supply,” says Oliver.
Jaskula waves a red flag on a possible over-supply-price-pressure scenario.
He warns that, if some of the development projects currently in the pipeline start producing lithium in the near term, adding to the production of lithium by current suppliers, then there may be an oversupply of lithium in the next decade.
This could drag down prices, potentially pushing some emerging producers out of the market “since the reduced lithium price may then be lower than their production costs”.
The lithium price is already under pressure.
Although demand dropped last year, 2009 lithium prices remained at levels similar to those of 2008, However, in late 2009, SQM announced that it would reduce its lithium prices by 20% for all contracts written in 2010.
Other lithium producers have not yet announced any price decreases for 2010, says Jaskula.
EMERGING PRODUCERS SAY ELECTRIC CAR IS ANSWER TO DEMAND
Canada Lithium, sporting an electric vehicle on its home page, is an emerging lithium producer.
Investor relations director Olav Svela says the company is upbeat about the demand for the commodity.
“Our own projections suggest supply will reach approximately 185 000 t in 2015, and that demand will likely be higher than that, given the projected growth in demand due to electric car and motorcycle batteries.
“We think that even with new producers coming on stream, or expansion by existing producers, lithium prices will rise.”
Svela says he believes the North American company’s work carries more importance than merely speaking to a pure supply-demand situation.
“US President Barack Obama says he does not want an Organisation of the Petroleum Exporting Countries-style cartel controlling the lithium industry. That is why we view our project as strategic to US interests because we are in mining-friendly Canada.”
Canada Lithium has initiated a prefeasibility study on its Quebec lithium project, near Val d’Or.
“We plan to be commissioning the mine and the processing plant by 2012,” says Svela.
Western Lithium is another emerging lithium producer and is developing its Nevada lithium deposit, in the US, to support what it says is “the new generation of hybrid/ electric vehicles”.
Western Lithium president Jay Chmelauskas tells Mining Weekly that the electric car has “the potential to completely change the nature of the lithium industry”.
He says a growing number of automotive industry leaders and analysts expect at least 10% to 25% of vehicles to be electrically powered in some way by 2020.
“An automotive market with 10% electric vehicles and 25% hybrid vehicles is estimated to require around 300 000 t of battery grade lithium carbonate per year,” says Chmelauskas.
“To put that into perspective, that is three times the size of the entire lithium market at present and 15 times the amount of battery-grade lithium carbonate that is being made today.
“We expect additional production to come on line over the next several years to match the development of the electric vehicle. Some of that is expected to come from current producers; however, we expect to see additional projects from outside the current geographic- ally concentrated supply base, which will also mitigate some of the political, social and geographical concentration present in the existing supply structure.”
Chmelauskas says Western Lithium’s project in Nevada, scheduled for full production in 2014, “is very well timed to take advantage of the projected demand upswing, and is particularly well suited to the just-in-time manufacturing culture of the automotive industry. Our production brings geographic diversity, is scalable and has significant flexibility in both quantity and quality.”
Western Lithium has one of the world’s largest known lithium deposits.
Developing it is a scalable project, with 8% of the historical deposit scheduled for development in the first stage and potential production of 27 700 t of lithium carbonate a year, and with a potential by-product of 115 000 t of potassium sulphate a year.
Cash operating costs are estimated at $1 967/t of lithium carbonate, after the potassium sulphate by-product credit.
“Following a positive scoping study released earlier this year, we are now proceeding with further engineering and pilot plant studies to advance the project to prefeasibility,” says Chmelauskas.
“We are in discussions with major lithium buyers to define product quality specifications, long-term supply requirements, and we expect to work with these groups through the piloting programme.”
SCRAMBLE TO SECURE SUPPLY
As of 2008 – the latest date available for worldwide consumption data – Roskill estimates that China and Europe are the largest consumers of lithium, each accounting for about 28% of total consumption.
Japan and North America (13%) are the next biggest consumers.
The US is the world’s largest importer of lithium carbonate, which it converts into downstream products, or into lithium hydroxide, for the export market.
As lithium is used in batteries for cellphones and laptops, and in new-generation electric cars and defence vehicles, it has morphed into a strategic source of energy.
“As with other commodities such as oil, iron-ore and copper, Japan and China are trying to secure long-term supply of other commodities important to their industrial growth,” notes Oliver.
“If the forecast growth in electric and hybrid vehicles materialises, then lithium may also become a strategic commodity.”
Chmelauskas believes that lithium is increasingly viewed as a strategic resource, and specifically to support the large-scale investments being made in the electric vehicle sector.
“Auto manufacturers and large-scale suppliers to that industry realise that the lithium-dependent sector of their end market – electric/hybrid automobiles, cell phones, computers – could easily generate revenues of $300-billion a year by 2020 and, so, are looking ahead to secure reliable supplies. We are starting to see countries and com- panies making investments today to ensure a stable and diversified supply of high- quality lithium.”
“Some countries do seem to be scrambling to secure supply,” concurs Jaskula. “Japan has struck deals with Argentina and possibly Bolivia. Canada is staking many mining claims, both inside and outside of Canada.”
He says last year turned out to be quite a boom year for lithium exploration, as there was a “huge increase in the number of potentially emerging lithium producers worldwide since 2008”.
As of January this year, more than a hundred companies are actively looking for lithium, with 68 of these companies being Canadian.
Jaskula says 144 new properties have been staked or claimed and are being evaluated.
“Some of these new companies are already fully financed and carry no debt, as their investors believe lithium may be the next gold rush.”
There are many companies staking claims in the US in anticipation of obtaining lithium from both mineral and brine sources, adds Jaskula.
Hectorite clays and geothermal brines are also being explored.
“Western Lithium is currently developing a lithium-rich hectorite clay operation and is making good progress.
“Geothermal brines located in southern California and throughout the world are generally rich in lithium, as well as other profitable industrial minerals. Simbol Mining is exploring the viability of obtaining lithium from geothermal waste streams generated by California’s Mammoth Lakes geothermal plant.”
In Africa, Zimbabwe, Niger, Namibia, Senegal and Côte d’Ivoire have known lithium deposits.
Jaskula is, perhaps, more cautious in his long-term market outlook than the various mining companies.
“There is more than enough economically obtainable lithium available in the short to medium term to meet the needs of lithium for hybrid and electric vehicles, no matter what the future demand is from these vehicles. In the long term, once recycling of lithium vehicle batteries has reached its cost-effective stride, approximately 20 to 30 years from now, the primary source of lithium from then on will be from recycling, and not from virgin lithium sources.
“Also, lithium battery chemistry development is in an extremely dynamic phase right now, with each new generation of battery chemistry offering more power, lower cost, greater driving distances, and lower lithium requirements than the [previous] battery chemistry.”
ALLOYS OFFER ANOTHER DEMAND BOON
Anderson expects another “breakthrough for lithium” to be the adoption of lithium metal in alloy production.
“An addition of 1% of lithium to aluminium results in a 3% reduction in weight and a 5% increase in stiffness. This offers quite an advantage in aerospace. We see these alloys have now already been adopted, even for structural uses in mainstream commercial aircraft like Airbus and Boeing.”
Anderson says this means the long-term lithium use in alloy production will become “quite major, following a strikingly similar adoption curve over time [to that for] batteries”.
He expects demand from this market to take up 10% of lithium supply in 2020.
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