Lithium

Cobalt and lithium have big roles in the burgeoning electric-vehicle market, but they’re still subject to price volatility. scharfsinn86/Adobe Stock

This morning in metals news, demand for cobalt and lithium will only grow with the electric car industry, but price ups and downs are likely in the offing, too; London copper took a dip after the U.S. Federal Reserve’s interest rate hike announcement Wednesday; and the U.S. coal industry, in a world with less demand for coal as an energy product, might have to get creative. One writer suggests mining for coal — not for coal itself, but for rare-earth metals contained within it.

Cobalt, lithium markets growing with EVs, but could see fluctuation

One thing is certain: the electric-car industry is growing rapidly.

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According to a Reuters story Thursday by Andy Home, the number of electric cars on roads worldwide doubled last year to 2 million — but only accounted for 0.2% of the global total. However, estimates indicate that number will grow to 3% as soon as 2021 and 14% in 2025.

With that growth comes a need for certain kinds of metals, like cobalt and lithium.

But with a still relatively young electric-vehicle industry, what will demand for these metals look like in the near future?

Cobalt and lithium, for example, are on the “front-line” of the “green transport revolution, Home writes. But that means, to an extent, being subject to the whims of an industry in its early stages.

Large price hikes in lithium late last year and early this year have leveled off. Home added there could be further price volatility, as producers, analysts and traders try to construct consensus demand models.

Copper falls to one-week low

Copper on the London Metal Exchange (LME) dropped to a one-week low Thursday, on the heels of the U.S. Federal Reserve’s decision to hike interest rates for the second time this year, Reuters reported.

Copper fell to $5,462 per ton, according to the report.

Financial uncertainty in the U.S. and a slowing of the Chinese economy will put selling pressure on metals, according to a Kingdom Futures report quoted by Reuters.

Coal industry mining for … rare earths

Global coal production has declined each of the last three years. With a decline in demand, coal-mining operations have to adapt to a world increasingly powered by green energy.

The solution for some might be mining for coal, not for coal’s energy-producing properties, but for the rare-earth metals found within them, according to an article Thursday in Quartz. Per the article, China currently produces 90% of the world’s rare-earth metals.

It’s an interesting idea, even if author Akshat Rathi writes that his three ideas for extraction of rare-earth metals from coal are currently not economically feasible.

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But, as mentioned in yesterday’s This Morning in Metals post, producers have to adapt with the times. Whether we’re talking about copper producers looking for new markets for their copper or coal-mining operations mining for rare-earth metals found within coal, producers have to adjust or risk being left behind.

After rising aggressively, some would argue that lithium prices have already peaked.

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Reuters quotes Paul Robinson, director at consultancy CRU Group saying that prices have little upside because demand growth has been met with aggressive supply build up, similar to rare earths and vanadium in past cycles. Even though demand is projected to soar 60% to 300,000 metric tons of lithium carbonate equivalent (LCE) annually by 2020, the newspaper quotes a National Bank Financial report saying new players could flood the market.

Strong Demand is Company, 60% Growth is a Crowd

“It’s crowded, no doubt about it, and it will get culled,” said Jon Hykawy, president of Stormcrow Capital, calling lithium, the “latest bubble sector.”

An indication of extent to which lithium fever has gripped investors and junior miners is illustrated in a Bloomberg article which reports that in the wake of President Mauricio Macri’s decision to remove currency and capital controls and taxes introduced by his predecessors, about 40 foreign companies began to consider opportunities in Argentina’s mining industry. More than half of those planning to mine lithium. Read more

About a year ago I was interviewed by a columnist from a leading economic newspaper about the prospects for the lithium market.

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The gist of the article was the question of will lithium demand from electric vehicles unsustainably drive up prices due to supply shortages? I said no. I expected the market to rise as demand increased, but that there was no shortage of lithium in the world and supply would rise in response to price increases and demand.

Well, the paper went on to report that supply shortages would constrain the market and the lithium price was set to boom. That’s okay. I don’t expect everyone to take my advice as gospel and, to some extent, you could say the author was right, the price has risen as this graph from CRU illustrates.

Source CRU Group

Source: CRU Group

But the same CRU article goes on to explain that to every price rise there is a response. The extent to which the market responds with new capacity or expansion to existing capacities varies with the commodity, the market during the time frame involved and any number of other issues. We will come back to CRU’s modelling of the lithium market a little later but, for now, how has the lithium industry responded to this rise in demand and what effect has the rising price had?

Lithium Investing

Well, Reuters leads an article with “stampede to invest in lithium mines threatens price gains” and goes on, as the title suggests, to say a rush to invest in new and expanded mines for lithium means material will flood the market just as demand for lithium batteries is due to soar, curbing prices. Read more

I was asked recently if I thought the world was going to run out of lithium.

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It was the type of question that illustrates the fever that is gripping this small and specialist market, much as the hype that drove rare earth elements through the roof a few years ago and briefly allowed a flood of investment to be available for the development of new mines and processing operations such as Molycorp’s Mountain Pass, only for the market to then collapse again a year or two later.

Don’t Believe the Hype?

An Economist article underlines the case regarding lithium. Much of the recent hype is due to a doubling of lithium carbonate prices imported into China in the last two months of 2015 and comments by analysts from places such as Goldman Sachs calling lithium the “new gasoline” reflecting their opinion that electric vehicles are about to take off — in sales terms, not literally.

Is the investment hype over lithium-ion batteries justified? Source: Adobe Stock/bbbastien.

Is the investment hype over lithium-ion batteries justified? Source: Adobe Stock/bbbastien.

Yet sales of lithium salts such as lithium carbonate and lithium hydroxide make up a market of only about $1 billion per year, small when you consider — like rare earth elements — their ubiquitous presence in just about every electronic gadget. All-electric cars and, increasingly, power tools and products previously powered by nickel-hydride batteries use lithium. Read more

There was a time (and I can remember it) when the streets of Shanghai at rush hour were a manic surge of bicycles either waiting at lights or streaming across junctions. Those have now gone, to be replaced by the roar of autos and the hum of electric bikes. Currently there are approximately 140 million e-bikes and scooters in use in China. Last year, China manufactured about 25 million EV 2-wheelers, of which some 600,000 were exported according to EVU Update. A China source is quoted as saying, ¨¨”We estimate the annual growth of EV2wheelers in China will maintain 10% or more than that. In 2015, we estimate the production volume will reach 35 million and export volume will reach 2 million. They offer low-cost personal mobility, can be stored indoors or securely by apartment dwellers and for the authorities fighting pollution have the great attraction of being non-polluting at least at the point of use. More than 90 Chinese cities ban petrol-powered motorcycles, providing a huge benefit to e-bike manufacturers.

The power sources are predominantly advanced lead-acid batteries, although Li-ion is gradually eating into the heavy metal’s market share. Businessweek reports that overall, the market for lead-acid batteries will grow from 83 GWh valued at $9.4 billion this year to 165 GWh valued at $16.1 billion by 2016. Gradually, Li-ion is making inroads supported by the intensely competitive nature of the market. There are some 800 e-bike manufacturers involved in mass production, never-mind the 2,600 approved manufacturers that include many assemblers. Differentiation at the top end can only be achieved by innovation such as lighter, more powerful batteries using Li-ion. Government-supported R&D and Li-ion battery exports are supported by tax breaks, further stimulating uptake. Even as lead use grows in absolute terms, Li-ion is growing alongside.

Nor is Li-ion battery development playing solely to the e-bike tune. While major EV car models like the Volt and Leaf get the headline attention, the market is being driven much faster by what are termed micro hybrid vehicles, meaning those that use storage towards stop/start and regenerative breaking applications, neither of which require drastic changes to existing car designs or rely on radically new technologies. Global growth is set to explode from a current lowly 5.1 GWh worth just $495 million today to some 41 GWh worth $3.1 billion in just five years.

China is not so unique in terms of city density, levels of disposable income and problems with pollution to make the China e-bike phenomenon unique. Indonesia, Vietnam, Thailand, India and even Brazil could develop similar e-bike cultures. However it is not a Chinese market industry that foreign manufacturers have much chance of breaking into, unlike auto manufacturing where the greater product sophistication gave western car makers an advantage in breaking into China. But metal demand, particularly lead and lithium growth, is already having a very significant impact on world prices as a result of e-bikes, and shows little sign of abating much before the second half of the decade.

–Stuart Burns

Perhaps the biggest hurdle to the widespread uptake of electric cars is not their comparatively short range, but the long time it takes to re-charge the batteries. If a car like the Nissan Leaf manages only an 80-90 mile range as this test suggests (as against the manufacturers’ 108 miles from a tank of sparks) you at least want to know you can re-charge and continue your journey, as with an internal combustion engine. In practice though, a Leaf takes seven to eight hours for a full charge using a 240V – 16A outlet as in the UK. Public quick-charging points are said to give an 80% charge in about 30 minutes. That’s OK if you want to have a cup of coffee and read the papers, but you don’t want to be doing that every 80 miles on a longer journey. So faster charging that would allow, say, a 2-minute turnaround similar to refueling a conventional car could open up use of cars like the Leaf to mainstream rather than just city users.

Well, research at the University of Illinois holds out just that promise, according to an article by the Economist. Their most successful experiment has recharged to almost 100% in two minutes. In addition, the technology applies equally well to nickel hydride batteries as to lithium ion. As the article explains, a battery has two electrodes, an anode and a cathode, that are connected by an electrically conductive material”generally a liquid”called an electrolyte. Under normal discharge conditions, negatively charged electrons flow from the anode to the cathode providing a source of electric current. To balance the circuit, positively charged ions flow from the anode to cathode to balance the charges. During recharging, an external source of electrons flows in the opposite direction replacing the positively charged ions ready for discharge again in the future. The speed at which a battery recharges depends on the surface area of contact between the electrolyte and the cathode, but crucially, the amount of energy a battery can hold is dependent on the volume of the electrodes. What is needed is both a high volume and a high surface area for cathode and anode.

Dr. Paul Braun at the university has developed a process to achieve just such an outcome. His starting material is made of closely packed polystyrene spheres about 0.001 millimeters (0.00004 inches) in diameter. The next stage is to fill the gaps between the spheres with nickel by electro-deposition, similar to nickel-plating a piece of steel. After that, the material is heated, to melt the polystyrene and leave a sponge made of metallic nickel. This creates an electrically conductive framework suitable for coating with materials normally used to make cathodes such as a substance called nickel oxyhydroxide for the nickel-metal hydride version of the battery and lithium ion-spiked manganese dioxide for the lithium ion version.

The result is a charging rate 10 to 100 times faster than a normal commercial battery, but with an increase in production costs estimated to be only 20-30 percent more than current methods. 20-30 percent is not to be dismissed, as the battery is a very significant part of the cost of new electric vehicles, but for the convenience of internal combustion “refueling rates, it may be a price worth paying over the life of the car.

How far Dr. Braun’s technology is from commercial application is unclear, but if the wall of money that has poured into new battery technologies is anything to go by, there is no lack of enthusiasm out there to find just such a solution to improving charging rates.

–Stuart Burns

As a mother of two relatively young kids (almost 7 and almost 4), I tend to think we pay pretty close attention to product recalls and safety hazards. Though we had to return several Thomas the Train cars a few years ago (when we learned they contained lead paint) and had to stop using our Volo stroller (due to finger pinching dangers) I’ve always thought of our house as “relatively hazard free. We feel “lucky to have escaped the McDonald’s cadmium glass fiasco of last week. As a self-admitted neat freak, nothing gives me more pleasure than throwing something away (or recycling wherever possible). Though we had to clear out many of our drinking bottles (not BPA free), order anyone that cooks for our kids to “only microwave in glass or ceramic bowls and plates and try to limit the amount of time our kids interact with anything “digital, the reality is that we’re naïve to think our home is “safe.

And now we learn that lithium cell batteries (the ones that look like these pictured below):

(Photo Courtesy of ECVV.com)

specifically, battery ingestion is on the rise NY Times blog post.

Button cell batteries appear in, “remote controls, toys, musical greeting cards, bathroom scales and other home electronics. Apparently, the battery’s current can set off an internal chemical reaction which impacts the esophagus and as the case of a 13-month old referenced in the Times post who had ingested one of these batteries, the current affected the aorta and resulted in the child’s death, even though doctors found the battery and surgically removed it.

Though the absolute number of fatalities involving these batteries remains low, according to the NY Times, “Data from the National Capital Poison Center in Washington found a sevenfold increase in severe complications from button cell ingestions in recent years. Moderate to severe cases have risen from less than a half percent (about a dozen cases per year) to about 3 percent (nearly 100 cases per year), based on a review of 56,000 cases since 1985.

The study’s recommendations included revised treatment guidelines to speed the process of removing these batteries from the esophagus, greater “vigilance for delayed complications and identify patients who require urgent radiographs. The Times article also quoted the author of the study who suggested that electronics makers alter the battery replacement backs for these household items to require the use of a screwdriver (similar to how most battery operated children’s toys work today). I can’t say I’m a giant fan screwdriver enclosed batteries but I’ll take it over the alternative.

–Lisa Reisman

For those of you movie buffs out there who enjoyed the first Iron Man, we have to give a resounding two thumbs up to the sequel. However, our analysis of this film differs greatly from our first piece written nearly two years ago that basically included a cost-to-build analysis of Tony Stark’s suit in which we offered options for cost-reduction. The sequel presents a couple of challenges that ironically mirror several geo-political issues involved in today’s metals markets.

Let’s start with “the enemy. In general, I think Hollywood needs to update its country of choice that serves as the “evil villain. I mean, after all, Russia is so 1980s. Personally, I’d suggest the obvious axis of evil Iran and North Korea (obviously Iraq wouldn’t work anymore). I’d also short list personal favorites such as Venezuela (particularly as Venezuela has some new news around nationalizing metals industries from this weekend, which we’ve covered in a separate post) but heck, I’d go one step further and suggest China as a front-runner. We have everything there, from trade policies, corporate espionage (we are aware of two cases involving China hacking into US manufacturing organizations attempting to steal intellectual property) not to mention financial dealings and hoarding of rare earth metals, etc. So, come on Marvel, let’s move into the 21st century here!

The second big difference between the first and second movies involves this device that Tony Stark must wear to stay alive. In our first post, we indicated this as a 1.5-gram palladium device used to avoid shrapnel blockage in Stark’s heart. We learn in this movie that the palladium is actually toxic and is slowly poisoning Stark’s blood. The antidote? Samuel L. Jackson to the rescue with a shot of lithium-dioxide that alleviates the toxicity of the palladium, but only serves as a stopgap measure.  Now, I’m not a chemist, but it appears as though the movie researchers should have spent a bit more time on this one. Lithium-dioxide is not commonly referred to in chemistry circles. We have either lithium-sulfur-dioxide used for car batteries, industrial applications as well as defibrillators (we could buy that last use for this application) or lithium oxide used for thermal barrier coating systems (less plausible). Regardless, rare earth metals played center stage in the sequel.

Of course in this movie, Tony Stark must develop an entirely new replacement for his palladium heart piece. And therein lies the rub. Today, few replacements exist for certain metals, particularly palladium and rhodium. Stark takes a few lessons from his father and manages to create this completely new element, presumably from some nano-technology, though we can’t quite be sure. I don’t know, but it seems to me we have the possibilities for a trilogy with this China/rare earth metal theme.

–Lisa Reisman

Posco revealed several bits of news about two weeks ago which steel buyers everywhere may find of interest. The first piece of news involves its own estimates of steel demand increasing by 10% this year. That may not strike anyone as noteworthy given the past year but nonetheless, it appears positive.  The second bit of news of interest for metal buying organizations involves the level of R&D spending by Posco. It intends to increase its research to sales ratio from 1.5% to 1.7% as well as continue cost cutting efforts. But perhaps the most interesting news involved its announcement to invest (and we have seen differing reports on the amount) either $6.02b or 3 trillion won of its $8.3b investment spending for acquisitions.

Since most of the M&A news that makes its rounds here in the States involves the domestic or global steel producers or Chinese firms who have acquired a variety of global interests, we have rarely, if ever reported on M&A activities of other Asian firms. According to this Reuters article, Posco intends to go after key raw material supplies including a 15% investment in an iron ore project in Australia along with capability to “expand wallet within existing customers by purchasing Thailand based Thainox (a stainless steel producer). In addition, Posco has also gone after key clients to add to its acquisitions, particularly those industries expected to grow considerably this year such as Daewoo Shipbuilding, Daewoo Engineering & Construction and Daewoo International with significant trading and energy development business as these businesses give Posco an “in to energy exploration and development.

Posco’s move buying into a new lithium producer PAL may send a strong signal as to where at least one steel producer sees not only improved demand but also new demand. Toyota and Posco have started to place their bets on the market for HEV’s and PHEV’s. These types of M&A activities also tell us much about how these firms view supply risk. Off-take agreements, direct investment, joint ventures and partnerships will likely only grow as some of these new technologies take root. Stay tuned.

–Lisa Reisman

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Last week, we ran a post covering a a key raw material supply investment made by Toyota. But number four steel producer, Posco has also made some big headlines by doing the same. According to Simon Moores, Deputy Editor and Mark Watts, in their story, “Industrial Giants Invest in Lithium in this month’s issue of Industrial Minerals magazine, they examine Posco’s rather surprising move in the field of rare earth metals. We re-post here, with permission, several details from their article (link above)

“POSCO has invested $4.8m into PAL, a new company which is aiming to produce 10,000 tpa lithium carbonate from a geothermal brine resources in Mexico and 10,000 tpa from an Andean brine in Region III of Chile where the industry’s top two producers, SQM SA and Chemetall GmbH operate.

POSCO Ëœwon’t be passive’

When POSCO struck its deal with PAL in mid-January many eyebrows were raised, none more so than in the steel industry which could not fathom why such a large producer would be interested in a commodity that is yet to register on the radar of many in the metals business.

“We’re looking for a potential off-take partner, and it’s likely that POSCO won’t be passive, explained Damien Lowry, PAL’s investor relations manager, “¦it looks like they’re looking to secure a source of lithium that they would sell to their own market.

The driver behind this deal is the South Korean government, which has been the most active and aware of the risk its lack of domestic lithium production poses.   It has quickly realized the need to secure large lithium carbonate tonnages as plans to mass produce hybrid and electric vehicles mature.  This message has filtered down to some of its biggest corporations.

We aren’t surprised by Posco’s foray into some of the metals driving the green tech/clean tech revolution. ArcelorMittal has also publicly implemented a strategy to make more strategic investments in key end-user segments as well as technologies to make their own operations more carbon friendly and efficient. Perhaps the most interesting footnote on the Posco story involves some statements made by Warren Buffett. Buffett, who has a 4.5% share of Posco, supposedly said to Posco that he should have purchased more Posco shares last year. Given Buffett’s 10% ownership stake in BYD, a Chinese hybrid-electric battery maker, (which uses lithium in its batteries), one can see why Buffett has an interest in Posco.

In a follow-up post we’ll examine some of Posco’s other strategic investments.

–Lisa Reisman

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