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Lithium market: opportunities and challenges for Chile
Seminario Tecnologías Emergentes de
Extracción y Procesamiento de Litio
10 Octubre 2019
Víctor Rodríguez
Principal Consultant, CRU Consulting
Santiago
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2
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About CRU
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12
Mg
4
Be
20
Ca
38
Sr
56
Ba
88
Ra
11
Na
3
Li
19
K
37
Rb
55
Cs
87
Fr
1
H
57-70
*
89-102
**
71
Lu
103
Lr
21
Sc
39
Y
72
Hf
104
Rf
22
Ti
40
Zr
73
Ta
105
Db
23
V
41
Nb
74
W
106
Sg
24
Cr
42
Mo
75
Re
107
Bh
25
Mn
43
Tc
76
Os
108
Hs
26
Fe
44
Ru
77
Ir
109
Mt
27
Co
45
Rh
78
Pt
110
Ds
28
Ni
46
Pd
79
Au
111
Rg
29
Cu
47
Ag
80
Hg
112
Cn
30
Zn
48
Cd
31
Ga
49
In
5
B
13
AI
81
Ti
113
Uut
32
Ge
50
Sn
6
C
14
Si
82
Pb
114
Uuq
33
As
51
Sb
7
N
15
P
83
Bi
115
Uup
34
Se
52
Te
8
O
16
S
84
Po
116
Uuh
35
Br
53
I
9
F
17
CI
85
At
117
Uus
18
Ar
36
Kr
2
He
10
Ne
54
Xe
86
Rn
118
Uuo
57
La
89
Ac
58
Ce
90
Th
59
Pr
91
Pa
60
Nd
92
U
61
Pm
93
Np
62
Sm
94
Pu
63
Eu
95
Am
64
Eu
96
Am
65
Tb
97
Bk
66
Dy
98
Cf
67
Ho
99
Es
68
Er
100
Fm
69
Tm
101
Md
70
Yb
102
No
Regular CRU product coverage
Specialised CRU product coverage
5
CRU’s multi-commodity expertise
Contents
Contents
1. Background & demand drivers
2. Chile in the Global Market
3. Opportunities for downstream value addition
4. Summary
Why are we here today?
7
Lithium consumption by end use, t LCE
Data: CRU. Bar race chart by Flourish team
Large scale ramp up in EV adoption expected in mid-2020s
8
• From mid-2020s total cost of ownership begins to strongly favor EVs in most regions due to battery
manufacturing cost declines – in the near term subsidies and other policies are crucial to EV sales
• EV availability remains key barrier to adoption in the short term as evidenced by long wait times for buyers,
this will diminish as OEM investments ramp up
• Outlook for EVs highly dependent on China, especially in the short term (weak sales in 2019)
Light vehicle sales by powertrain, global
Million units (LHS, bar), Market share (RHS, line)
xEVs sales by region
Million units (LHS, bar), Market share (RHS, line)
0%
10%
20%
30%
40%
50%
60%
70%
0
30
60
90
120
2015 2020 2025 2030 2035 2040
BEV other Evs ICE % EVs
0%
20%
40%
60%
80%
0
20
40
60
80
2015 2020 2025 2030 2035 2040
China N America W Europe Asia Dev RoW % China
Higher nickel intensity batteries is changing lithium product selection
9
LDV/HDV/Bus battery demand by cathode type,
Percent market share
Lithium demand by application and production type
Thousand tonnes LCE
Hydroxide market to grow >500% by 2024 & could overtake carbonate longer term
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2015 2020 2025 2030
NCA
NMC811
NMC622
NMC532
NMC111
LMO
LFP
122 134 154
55 101
295
13
38
227
191
273
675
-
100
200
300
400
500
600
700
800
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Industrial Batteries (carbonate) Batteries (hydroxide)
CAGR Li demand: 16.3%
Contents
Contents
1. Background & demand drivers
2. Chile in the Global Market
3. Opportunities for downstream value addition
4. Summary
60
70
80
90
100
110
120
130
2016 2017 2018 2019 2020 2021 2022 2023 2024
Chile to increase lithium production by 55% from 2018 till 2024
11
Large expansions in other countries will see Chile’s share of mine production decrease though the
country remains a leading source of lithium chemical supply
Chilean mine supply
Thousand tonnes LCE
Proportion of mine production by country, selected years
Percent market share
13%9% 10%
29%47% 42%
9%
13% 21%
39%
23% 18%
9% 8% 8%
0%
20%
40%
60%
80%
100%
2015 2018 2024
Argentina Australia China Chile RoW
Chilean producers are and will remain highly competitive in carbonate
12
2018 Lithium carbonate production costs by asset
$ per tonne, LCE
0
3,000
6,000
9,000
12,000
15,000
18,000
0
Bu
sin
ess c
osts
, $/L
CE
Cumulative production, %
Argentina Chile Other Price Quartiles
2024 Lithium carbonate production costs by asset
$ per tonne, LCE
0
3,000
6,000
9,000
12,000
15,000
0
Bu
sin
ess c
osts
, $/L
CE
Cumulative production, t LCE
Argentina Chile Others Forecast price Quartiles
Unsustainable high
margins!
Royalties form a large part of current Chilean operating costs
13
• The new regime is progressive. As royalties scale with prices they do not threaten the operations in a
weaker price environment – they will always be at the lower cost end of the cost curve.
0%
5%
10%
15%
20%
25%
30%
0 5000 10000 15000 20000
Li carbonate price $/t
0
1000
2000
3000
4000
5000
6000
Chile Argentina Chile Argentina Chile Argentina
Price = 14166 $/t Price = 10000 $/t Price = 8000 $/t
Royalty cost All other costs
Carbonate production costs, US$/t LCE Effective Chilean royalty rate
+66%+45%
+2%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Chile (brine) Argentina (brine) Australia (hardrock)
China (hard rock) Chile (brine) Argentina (brine) Australia (hardrock)
China (hard rock) Purchased Li2CO3
Carbonate Hydroxide
Incremental hydroxide processing costs lower from hard rock compared to brines
14
Captive raw material
advantage explains Australian
hydroxide activity
Lithium carbonate and hydroxide processing costs by raw material source (2019)
US$/t LCE
Brines advantage over hard rock for hydroxide production is far less clear cut
Carbonate Hydroxide
Oversupply could lead to re-prioritization of value over volumes
15
• Favor lower cost Chilean projects over those elsewhere
• Market size still expected to grow rapidly; would expect to see consumers still looking to secure supplies
• Well-established reputation and reliability are key differentiators
Lithium demand (high scenario) and unweighted supply
Thousand tonnes LCE
Lithium carbonate FOB export prices, Chile
$ per tonne
0
300
600
900
1,200
1,500
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Operations CommittedProbable PossibleSpeculative Demand (1Mt by 2025)
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A
2017 2018 2019
Albemarle SQM
-41%
Contents
Contents
1. Background & demand drivers
2. Chile in the Global Market
3. Opportunities for downstream value addition
4. Summary
Downstream investment appealing to producers and governments
17
Brines
Hard
rock
Lithium
chemicals
Precursor /
cathode
production
LIB
production
EVs
Electronics
Grid
storage
Salts of Ni, Co,
Mn, Al…
Spodumene
concentrate
Industrial
uses
Deposits Intermediates Battery chemicals Precursors Batteries
End uses
Recycling
Integrated lithium supply chain
Brand
Customer
relationships
Quality
Technical
ability /
knowhow
Capex costs
Quality / reliability
Input costs
Regulations
Quality of indigenous
resources
Proximity to downstream
processing
Value added >US$30bnUS$4 bn
• Part of SQM and Albemarle quota expansion agreement involved obligation to sell lithium carbonate at
reduced rates to any producers of battery cathode materials or other components within Chile.
• Numerous challenges remain for downstream investment
• Lithium is only a relatively small proportion of battery raw material costs (~30% at current prices)
• Local / low cost access to nickel and cobalt stronger drivers from a cost perspective
• Competing well-established East Asian supply chain
• Availability of skilled labor
• Lack of significant end consuming markets
• Increasing demand for hydroxide
Case study: Chile promoting domestic lithium discounts to encourage downstream investment
18
Outcome
• It will take more than discounted lithium to attract
downstream investment in Chile
• Supportive public policy is a necessary condition
• Chile may have an opportunity in Innovation and R&D
(e.g. brine processing) – great wealth of experience622 811 622 811
Lithium Cobalt Nickel Manganese
Cathode raw material costs, $/kWh
April 2018 August 2019
Contents
Contents
1. Background & demand drivers
2. Chile in the Global Market
3. Opportunities for downstream value addition
4. Summary
Summary
20
Market demand buoyant and expected to accelerate in long term, due to EV mass marketisation
Higher nickel intensity batteries favoring lithium hydroxide feedstocks
Latin American dominance in upstream being challenged by supply growth in Australia and China. Chile in good position to expand production.
Potential oversupply and price pressures could restore the competitive advantage for low cost brine producers in the longer term, as could some innovative processing technologies
Value creation opportunities downstream: a complex mix of market, technical and policy conditions required to realize potential. Chile to leverage on existing know-how and experience.
CRU International Limited
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Registered in England No.940750. Registered office: Charles House, 108-110 Finchley Road, London NW3 5JJ
21
Víctor Rodríguez
Principal Consultant, CRU Consulting
Santiago, Chile
+56 2 2231 3900
Juan Esteban Fuentes
Managing Consultant, CRU Consulting
Santiago, Chile
+56 2 2231 3900
