The lithium market: 2010 review and outlook

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The lithium market: 2010 review and outlook

  1. 1. The lithium market: 2009 review and outlook Robert Baylis Manager – Industrial Minerals Research Roskill Information Services Ltd. Roskill Approachable. Independent. Expert. 1
  2. 2. Disclaimer The statements in this presentation represent the considered views of Roskill Information Services Ltd. It includes certain statements that may be deemed "forward-looking statements." All statements in this presentation, other than statements of historical facts, that address future market developments, government actions and events, are forward-looking statements. Although Roskill Information Services Ltd. believes the outcomes expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include changes in battery output and general economic, market or business conditions. While Roskill Information Services Ltd has made every reasonable effort to ensure the veracity of the information presented it cannot expressly guarantee the accuracy and reliability of the estimates, forecasts and conclusions contained herein. Accordingly, the statements in the presentation should be used for general guidance only. Roskill Approachable. Independent. Expert. 2
  3. 3. Outline • Demand – The global economic downturn – Impact on lithium markets – Outlook • Supply – Trade indicators – Production – China update • Project developments – Advanced projects update – 2009 – a good year for explorers • Pricing movements Roskill Approachable. Independent. Expert. 3
  4. 4. Demand Roskill Approachable. Independent. Expert. 4
  5. 5. Lithium is consumed in wide variety of forms and end-uses Lithium is consumed in a wide-range of end-uses Lithium finds most use in carbonate and hydroxide form (around 50% of demand) Mineral forms of lithium account for 25% of consumption and chemicals and metal/alloys the remainder Batteries have been the main driver of demand growth and, despite the 2008/09 downturn, this will continue in the 2010s with new applications, e.g. electric vehicles However, lower growth in mature, industrial markets for lithium e.g. greases, aluminium, ceramics & glass will temper future demand Roskill Approachable. Independent. Expert. 5
  6. 6. The global economic downturn caused a sharp drop in industrial production between 2008 Q3 and 2009 Q1. Signs of recovery in H2 2009 World: Quarterly change in GDP and Industrial Output, 2006-2009 (%) 10.0 5.0 0.0 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4e -5.0 -10.0 -15.0 -20.0 -25.0 GDP Industrial Output Source: IMF, World Bank, CIA World Factsheet, Roskill estimates Roskill Approachable. Independent. Expert. 6
  7. 7. Views from the market, demand seen significantly down on 2008 “Lower end use demand and customer inventory destocking drove revenue decline” (FMC Corp, Jul 2009) “Revenues for the lithium and derivatives segment during first nine months of 2009 decrease of 38.7%” (SQM Sep, 2009) “Demand is off by 30% this year for the entire lithium industry” (Jon Evans, FMC Lithium, Industrial Minerals, Dec 2009) “Total lithium demand down 25% in 2009” (SQM, January 2009) Roskill Approachable. Independent. Expert. 7
  8. 8. Industrial output in the USA, Europe and Japan (which account for 60% of lithium demand) dropped by 15% between Q2 2008 and Q2 2009 Europe, Japan & USA: Quarterly change in industrial output, 2003-2009 (%) 115 110 Europe 105 100 USA 95 90 Japan 85 80 1 20 3 20 1 3 20 1 3 20 1 3 20 1 3 20 1 20 3 1 3 Q Q Q Q Q Q Q Q Q Q Q Q Q Q 03 03 04 04 05 05 06 06 07 07 08 08 09 09 20 20 20 20 20 20 20 Source: IMF, World Bank, OECD, EuroStat Note: Data re-based, 2005 Q3 = 100 Roskill Approachable. Independent. Expert. 8
  9. 9. Chinese industrial output remained positive in 2009 due to large fiscal stimulus package while GDP grew by 8.7% year-on-year China: Year-on-year change in industrial output, 2006-2009 (%) 20% 15% 10% 5% 0% 20 3 20 4 20 1 20 2 20 3 20 4 20 1 20 2 20 3 20 4 20 1 20 2 20 3 20 4 20 1 20 2 3 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 20 Source: IMF, World Bank, OECD, EuroStat Roskill Approachable. Independent. Expert. 9
  10. 10. Consumption down 15% in 2009, compared to average growth of 6%py between 2000 and 2008 World: Consumption of lithium by end-use, 2000-2009 (t LCE) 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Ceramics and glass Batteries Greases Aluminium Air treatment Continuous casting Rubber and thermoplastics Pharmaceuticals Other Source: Roskill data Roskill Approachable. Independent. Expert. 10
  11. 11. Why was 2009 so gloomy for lithium demand? Market dominated by industrial applications World: Consumption of lithium by end-use, 2009 Other Pharmaceutical 15% Ceramics and Rubber and 2% glass thermoplastics 31% 4% Continuous casting 4% Air treatment 6% Aluminium 6% Greases Batteries 9% 23% Source: Roskill data Roskill Approachable. Independent. Expert. 11
  12. 12. All of the key demand sectors for lithium have been affected, however the outlook for 2010 looks more positive Sector 2009 observations & outlook Ceramics & Glass •Construction sector to fall 3.7% in 2009, flat in 2010 Batteries •Li-ion battery production to register 3% growth in 2009, strong growth to return in 2010 Grease •Dip in industrial output hit 2009 demand, 2010 outlook brighter Aluminium •Capacity shuttered in 2009. Potential for supply crunch in 2010 and plant re-opening •Industrial and commercial property slump. Recovery in industrial production should Air-treatment boost demand in 2010 Continuous casting •Steel production down 8-9% in 2009, recovery in world output forecast for 2010 Rubber & •Rubber and plastics demand impacted by dip in industrial output, 2010 likely to show thermoplastics improvement Pharmaceuticals •Inelastic to recession, pharmaceuticals necessary items Roskill Approachable. Independent. Expert. 12
  13. 13. Consumption of lithium is forecast to increase to 147kt LCE in 2013 World: Forecast consumption of lithium, 2008-2013 (t LCE) +7.9% 150,000 +7.4% +13.4% +2.4% +11.0% 120,000 -15.0% 90,000 60,000 30,000 - 2008 2009f 2010f 2011f 2012f 2013f Ceramics & glass Batteries Industrial end-uses (grease, aluminium ) Other (pharmaceuticals, Al-Li alloys ) Source: Roskill estimates Roskill Approachable. Independent. Expert. 13
  14. 14. But it might not be all plain sailing Risk of hyper-inflation in developed countries, but more importantly in China This could increase interest rates and reduce liquidity in money markets, therefore hitting consumer spending Developed countries are also debt-laden, which could mean reduced outlay on infrastructure/public works Some analysts suspect there is a looming property bubble in China Recovery and growth in lithium demand in the short-term is not 100% certain Roskill Approachable. Independent. Expert. 14
  15. 15. Significant potential for increased lithium demand from mid-2010s as EV roll-out gains momentum World: Electric vehicle production and lihtium demand for electric vehicle batteries, 2008-2020 EV sales (Li-ion) Lithium demand for electric vehicle 6 140,000 Battery vehicle sales (M units) 5 120,000 PHEV sales (Li-ion) batteries (t LCE) 100,000 4 HEV sales (Li-ion) 80,000 3 60,000 HEV sales (NiMH) 2 40,000 1 20,000 Lithium demand from vehicles (10% penetration scenario) 0 0 Lithium demand from vehicles f f f f f f 08 10 12 14 16 18 20 (5% penetration scenario) 20 20 20 20 20 20 20 Source: Roskill data Note: Vehicle sales data assumes 5% electric vehicle penetration by 2020 Roskill (i.e. 5% of total vehicles will have some form of battery power assist) Approachable. Independent. Expert. 2kg LCE in HEV, 15kg LCE in PHEV and 22kg LCE in EV 15
  16. 16. Production Roskill Approachable. Independent. Expert. 16
  17. 17. Trade in lithium compounds fell by 43% in 2009, exports of lithium carbonate from Chile were down almost 50% Major producing countries: Exports of lithium compounds, 2000-2009 (t LCE) 90,000 80,000 70,000 60,000 Lithium chloride 50,000 Lithium hydroxide 40,000 Lithium carbonate 30,000 20,000 10,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e Source: Global Trade Atlas Notes: Lithium carbonate = Chile, Argentina, USA & China Lithium hydroxide = Chile, USA, China & Russia Roskill Lithium chloride = Chile, Argentina & China Approachable. Independent. Expert. Data for 2009 is extrapolated from Jan-Oct/Nov trade data 17
  18. 18. Lithium production estimated to have fallen by 25% to 100kt LCE in 2009 World: Production of lithium by country, 2000-2009e (t LCE) 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e Argentina Australia Chile China USA Others Source: The Economics of Lithium, 11th Edition, 2009; Roskill estimates for 2009 Roskill Approachable. Independent. Expert. 18
  19. 19. Chinese brine producers continue to debug process routes, progress seen slow & expensive, products often below market specification CITIC Guoan: Calcined separation method: can separate high Mg:Li ratio brine But, excess hydrochloric acid causing corrosion problems Produced around 1,100t LCE in 2009 JV with Chemphys, LOI with Toyota Tsusho for battery-grade Li carbonate Qinghai Lithium Co. (Western Mining): Membrane separation method (Mg:Li ratio taken from 20:1 to 1:2) Precipitation of salt & membrane plugging causing problems Produced around 2,000t LCE in 2009 Qinghai Salt Lake (Qinghai Salt Lake Potash): Resin absorption method, investigating nanofiltration High fresh water (600l/1t LCE), resin & power consumption = high cost Produced around 400t LCE in 2009 Tibet Mineral (Zabuye): Freeze-thaw evaporation method Poor fresh water resources & transport infrastructure = low capacity Produced around 1,000t LCE in 2009 Source: Press reports Roskill Approachable. Independent. Expert. 19
  20. 20. Chinese lithium consumption reaches 30,000t LCE in 2009, still reliant on Australian minerals China: Balance of Chinese lithium market, 2009 (t LCE) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 conversion production production Compound consumption consumption Compound Mineral imports Domestic Compound stocks Mineral Mineral imports exports Brine Mineral Source: Roskill data, Global Trade Atlas Note: Does not include lithium chemicals, metal and derivatives Roskill Approachable. Independent. Expert. 20
  21. 21. Existing world capacity sufficient to meet demand until mid-2010s, new capacity required to meet EV battery demand from 2014 World: Capacity for the production of lithium compounds, 2008-2013 (t LCE) 250,000 200,000 150,000 100,000 50,000 0 2008 2009e 2010f 2011f 2012f 2013f 2014f 2015f 2016f 2017f 2018f 2019f 2020f New capacity required Chinese mineral conversion capacity (effective) Chinese brine capacity (effective) Existing Americas brine capacity Compound consumption (5% EV penetration rate by 2020) Source: Roskill estimates Roskill Approachable. Independent. Expert. 21
  22. 22. Project updates Roskill Approachable. Independent. Expert. 22
  23. 23. 2009: the lithium exploration “boom” January 2009: 7 brine & 14 mineral producers 35+ projects in various stages of exploration & feasibility January 2010: 7 brine & 13 mineral producers (TANCO stopped in 2009) 2 projects under construction 1 project in feasibility stage 4 projects in pre-feasibility stage 60+ projects undergoing exploration POSCO, Magna, Toyota Tsusho announce investments in lithium explorers Roskill Approachable. Independent. Expert. 23
  24. 24. Status of potential new lithium projects at end- 2009 Company Location Type Capacity Start-up Status (t LCE) (estimated) Galaxy Resources Mount Cattlin, Mineral 17,000 2010 (Mine) Construction Australia conversion 2011 (Plant) Feasibility-stage & Jiangxi, China Sentient Group Rincon, Argentina Brine 1,2001 2010 Construction Orocobre Olaroz, Argentina Brine 15,000 2012 Feasibility-stage Canada Lithium Quebec, Canada Mineral 10,000+ 2012 Pre-feasibility conversion stage Keliber (Nordic Mining) Lantta, Finland Mineral 3,300 2013 Pre-feasibility conversion stage Simbol Mining California, USA Brine 2013 Pre-feasibility stage Western Lithium Nevada, USA Mineral 27,700 2014 Pre-feasibility conversion stage Source: Company data; Roskill estimates Note: 1 – Initial capacity of pre-production ponds Roskill Approachable. Independent. Expert. 24
  25. 25. Pricing movements Roskill Approachable. Independent. Expert. 25
  26. 26. Lithium carbonate prices increased only slightly in the 2000s compared to metals, missing the upturn, but avoiding the downturn World: Quarterly changes in average prices of lithium carbonate against the IMF metals commodity index, 2003-2009 400 300 200 100 0 1 3 1 3 1 3 1 3 1 3 1 3 1 3 Q Q Q Q Q Q Q Q Q Q Q Q Q Q 03 03 04 04 05 05 06 06 07 07 08 08 09 09 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Lithium carbonate price IMF commodity price index (metals) Source: Lithium carbonate price = average values of lithium carbonate (US$/kg) FOB USA from USITC; Metal commodity price index = IMF Roskill Note: Re-based, 2003 Q1 = 100 Approachable. Independent. Expert. 26
  27. 27. Lithium prices could falter slightly in 2010, but prices will remain >US$6/kg as long as mineral conversion supply required World: Average annual prices for lithium carbonate, 2008-2013 (US$/t) 7,500 7,000 6,500 6,000 5,500 5,000 4,500 4,000 2008 2009 2010f 2011f 2012f 2013f Source: Roskill estimates Roskill Approachable. Independent. Expert. 27
  28. 28. Industrial Minerals – Minor Metals – Steel Alloys New reports for 2010: Boron (Q1) – 15% delegate offer Magnesium Comps (Q1) – 15% delegate offer Iodine (Q2) Soda Ash (Q2) Contact: Robert Baylis Manager – Industrial Minerals Research +44 20 8944 0066 robert@roskill.co.uk Roskill Approachable. Independent. Expert. 28

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