Lithium producers hit by first big downturn of electric vehicle era

Nano One Materials

13/11/2019 06:00

By Ernest Scheyder
    LOS ANGELES, Nov 13 (Reuters) - The burgeoning lithium
industry, which produces the powerhouse metal used to make
electric vehicle (EV) batteries, has entered its first major
downturn, an unwelcome bruising for investors eager to help
combat climate change.
    Albemarle Corp  ALB.N , Tianqi Lithium Corp  002466.SZ  and
others have been producing more lithium than automakers need.
Global supply exceeds demand by about 5 percent, according to
Canaccord data. urn:newsml:reuters.com:*:nL2N26N1TI 
    That comes as electric vehicle sales in China - the world's
largest EV market - fell nearly a third in September amid
sliding government subsidies, the third consecutive monthly
decline, according to Jefferies.
    A global average of prices is down more than 50 percent
since the start of 2018, according to Benchmark Mineral
Intelligence, a metals pricing provider that is hosting an EV
supply chain conference this week in Los Angeles.
    "Current market conditions are challenging," Luke Kissam,
Albemarle's chief executive officer, said last week. urn:newsml:reuters.com:*:nL2N27N0XX
    
    Despite the weak data, analysts and executives expect a rosy
future when they look out 10 years. 
    Benchmark's Simon Moores called the lithium oversupply an
"air pocket that detracts from the building wall of demand," and
noted much of the excess white metal on the market is for
so-called technical grade, or the kind that goes into smaller
consumer electronics such as stopwatches.
    Battery-grade lithium is used primarily in EV batteries, and
many automakers have high purity standards. Much of the lithium
industry's capacity to produce high-quality, battery-grade
lithium is locked up until 2024, Moores said.
    Weather and social unrest are just two of the myriad issues
that have hampered the industry, fueling worries there may not
be enough of the white metal to sate automakers in the years
ahead.
    "The future supply of battery-quality chemicals is very much
in doubt," said Joe Lowry, an independent industry analyst, who
wondered how the industry can hope to produce at least 800,000
metric tons by 2025, more than double current capacity.
    The popularity of future models from Volkswagen AG
 VOWG_p.DE , Tesla and others will ultimately require massive
lithium investments in the billions of dollars, said Chris
Berry, an independent metals analyst.
    But for now, lithium companies have reacted to the price
drop by scaling back spending, a response to nervous investors
pushing the industry to focus more on profitability.
    "This delaying of investment will likely act as a powerful
precursor for a pricing cycle in the early 2020s," said Ernie
Ortiz, president of Lithium Royalty Corp, an affiliate of
Waratah Capital Advisors, which buys lithium royalty rights.

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Game of Mines    https://amers2.apps.cp.thomsonreuters.com/apps/newsservices/mediaProxy?apiKey=28e16fe5-d158-4537-9aac-e3e31f3318df&url=https%3A%2F%2Fgraphics.reuters.com%2FELECTRIC-VEHICLES-METALS%2F010092JB38P%2Findex.html
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 (Reporting by Ernest Scheyder; Editing by David Gregorio)
 ((ernest.scheyder@thomsonreuters.com; Twitter: @ErnestScheyder;
+1-713-210-8512; Reuters Messaging:
ernest.scheyder.thomsonreuters.com@reuters.net))