Pyoshi Expert Interview: Simon Moores

Pyoshi Expert Interview:

Simon Moores

Managing Director at Benchmark Mineral Intelligence
London, UK

#EVs #lithium_ion_battery #raw_materials #cobalt #nickel #graphite #tesla #gigafactory #megafactory

What are the most critical battery raw materials and why?

At Benchmark Mineral Intelligence we focus on lithium, cobalt, nickel and graphite as the most critical for the lithium ion battery industry.

These are the minerals and metals that aren’t commodities but speciality, engineered products. They are niche in the way they are produced and not all lithium and all graphite, for example, can be used by a lithium ion battery manufacturer.

This means the grades of minerals that is used by the battery industry is controlled to a large extent by the customer. The customer demands consistency and quality, first and second; price will usually be tertiary to this.

It is also not the metal that is consumed in the battery sector, but a chemical compound such as lithium hydroxide, lithium carbonate, cobalt sulphate, or nickel sulphate.

These industries produce in the 100,000s tonnes not the millions of tonnes. Therefore, to meet new and surging lithium ion demand, an evolution needs to take place.

At Benchmark Mineral Intelligence, you track the rise of lithium ion battery megafactories. Could you provide us an update on this?

Yes, so we track what we call lithium ion battery megafactories — these are new cellplants being built or expanded to above 1GWh.

Tesla coined the term Gigafactory but Benchmark created megafactory many years ago to describe the global wave of new battery plants, not just the Tesla plant in Nevada.

Since 2014, we have seen the number of planned megafactories go from 2 (Tesla and Samsung) to 18 today. In total, there is 269GWh of new lithium ion cell capacity in the pipeline in addition to today’s capacity of 110GWh. We believe that in 2016 the operating level of the industry was at 70GWh of global cell production.

However, many of these cell producers did not consider the raw material supply availability when planning these plants. The industry is now playing catch up.

How do you see the lithium market going forward to 2021?

Lithium has undergone significant volatility over the last two years. Prices for the battery grade materials of lithium carbonate and lithium hydroxide have in some cases quadrupled as a raw material shortage engulfs the market.

Battery demand has driven this shortage and as a result lithium has had is very own global gold rush as a new wave of explorers seek to capitalise by either finding a new large resource or building a new mine.

The reality is lithium is far more specialised than most people understand and the barrier for entry is high, even for those already producing from a brine or hard rock asset.

Going forward, we see a few trends.

The first is China’s lithium chemical convertors continuing to lock up raw material supply in Australia. We have seen this with both Ganfeng Lithium and Sichuan Tianqi investing significant sums into the country.

Australia has already seen new supply from Neometals’ Mt Marion mine and Galaxy Resources’ Mt Catlin mine with Talison Lithium expanding. However, it won’t be enough.

The second trend is new lithium brine supply will begin to come onstream in South America. However, this will be much slower and we don’t expect any new supply from any new brine operation before 2019–2020.
Lithium Americas’ partnership with SQM in Argentina is the first we expect to be onstream and some new production from the Atacama is possible in the interim period.

Lithium demand will grow between 14–18% a year for the next decade. So the changes have just started now.

Cobalt has seen more than a doubling in price in 12 months. What is Benchmark’s outlook for cobalt?

The cobalt market will remain tight for the next three years and we don’t see any significant price decline. However, we also don’t see a significant deficit in the cobalt market until 2020.

There are two large projects that are due to add supply in the time frame, these are Glencore’s Katanga mining in 2018 (return from care and maintenance) and ERG’s RTR project in 2019 both will add needed supply to the market as they ramp up towards capacity.

Around 2020 is when we will see both new battery cell production and new cathode capacity become available which will coincide with the entry of major auto manufacturers like VW into the EV space. This is when we see a significant change in the lithium ion battery supply chain.

How critical is nickel?

Nickel chemical is one of top input raw materials into a battery that is causing a headache for EV manufacturers. It is yet to get significant coverage because the metal price has been depressed.

However, the market for nickel chemical is very different and has seen upward price pressure.

The fact last week we saw BHP Billiton announce its entry into the nickel chemical market with a 100,000 tpa sulphate plant in Australia showed two things: the first was a need for significant new supply of nickel sulphate and the second was how a bit commodity producer is now pivoting from metal to a speciality chemical to become exposed to the EV revolution.

We expected to see more of this.

And what about graphite anodes?

Graphite is similar to nickel in that it has garnered less attention because the amount sold into lithium ion batteries is dwarfed by amounts sold into industrial uses. This means the price movements are tied to steel rather than batteries — lithium and cobalt are the opposite.

For battery consumers, getting the quality graphite anode material is just as a critical challenge as the other raw materials.

As a result we are seeing a shift from synthetic graphite to more natural graphite anode in the industry. Supply security is one reason for this, with large natural graphite focused expansions from Hitachi Chemical and BTR, and cost is second. Natural spherical graphite is up to 50% cheaper than its synthetic counterpart.

We have also seen major Silicon Valley end users of batteries focus on graphite more and more. The way its mined and processed will come under more scrutiny as we go forward and this responsible sourcing issue will affect graphite and all of the other battery raw materials.

Moving onto electric vehicles, where do we stand right now in 2017?

There is no doubt 2017 has been the year many were expecting in the EV space.

All the promise of the past ten years is now becoming a reality.

At Benchmark, we look at three models that have defined this: Tesla Model 3, Nissan’s new LEAF, and Chevrolet’s Bolt.

Many commentators have rightly said that the new price point of ~$35,000 for each of these vehicles is a watershed moment.

However, from and industry perspective we have seen something more important and that’s the significant increase in battery size that will put an end to hybrid cars.

We are now seeing the average battery size in the 55–65kWh range for new EVs, a huge step up which means more raw material demand.

Tesla’s Model 3 launched also came with a new long-range version we have calculated to carry a 80kWh NCA lithium ion battery. This means their new fleets of Model S and Model X will also likely see a battery capacity increase towards 150kWh.

We have also seen this trend in electric buses with the average now 300–350kWh. New producers like Proterra in California has a model with a huge 660kWh pack for longer range and this could well become the new standard as battery cells become cheaper.