Lithium glut? No way, say industry executives eyeing demand

Oroco Resource

27/02/2018 21:43

By Nicole Mordant 
    HOLLYWOOD, Fla., Feb 27 (Reuters) - Forecasts for a glut in 
lithium, a major ingredient in rechargeable batteries for 
electric vehicles, fail to account for strong demand and how 
complicated it is to process and mine, industry executives and 
analysts said.  
    Morgan Stanley sent lithium stocks tumbling on Monday after 
it forecast a surplus in the market in 2022 of 190,000 tonnes, 
resulting in predicted prices nearly halving to $7,699 a tonne. 
However, some industry officials took issue with the outlook. 
 urn:newsml:reuters.com:*:nL4N1QG4YG 
    "I am firmly of the view that everyone, including Morgan 
Stanley, is grossly underestimating how quickly the market is 
moving on the demand side," Ken Brinsden, chief executive of 
Australian lithium miner Pilbara Minerals  PLS.AX , said at a 
mining conference in Florida this week. 
    Pilbara recently inked supply agreements with Chinese and 
Korean battery- and automakers, giving them insight into Asian 
demand.  
    China has set goals for electric and plug-in hybrid cars to 
make up at least a fifth of its auto sales by 2025, with new 
quotas due to take effect in 2019. It also plans to shift away 
from petrol-engine cars. 
    The Morgan Stanley report hit high-flying lithium shares, 
including the world's two biggest producers, U.S.-based 
Albemarle Corp  ALB.N  and Chile's SQM  SQMa.SN , down as much 
as 8 percent on Monday. Most were down again on Tuesday.     
    Prices for lithium have more than doubled in the past two 
years on forecasts for massive demand from the electric vehicle 
industry, spurring work on a flurry of new mines or expansion 
plans for existing ones.  
    Forecasts of oversupply also fail to take into account that 
few lithium processors have the capacity and ability to produce 
the very high-grade lithium compounds that batteries need, said 
analyst Andrew Miller at Benchmark Mineral Intelligence, a 
UK-based battery metals consultancy.  
    He said he does not see a glut occurring in the next few 
years although the market could see small surpluses.  
    Lithium is mostly mined from hard rock deposits in Australia 
and brine pools in South America. Most of the processing of the 
hard rock material into battery chemicals is done in plants in 
China.  
    The lithium sector's history of delayed mine ramp ups and 
processing problems should also offer a lesson to glut 
forecasters, said Paul Graves, chief financial officer of FMC 
Corp  FMC.N , the world's fourth-biggest lithium producer. 
    "This is an industry that has repeatedly failed to bring on 
its supply in the way it predicted. It is always late and it is 
always more expensive to operate," he told Reuters at the 
conference.  
    Orocobre's  ORE.AX  brine project in Argentina was slow to 
ramp up and Galaxy Resources  GXY.AX  eventually sold a 
processing plant after it continued to operate below capacity. 
 
 (Reporting by Nicole Mordant in Hollywood, Florida; Editing by 
Ben Klayman) 
 ((nicole.mordant@thomsonreuters.com; +1-778-374-3854; Reuters 
Messaging: nicole.mordant.thomsonreuters.com@reuters.net)) 
 
Keywords: MINING BMO/LITHIUM