IPad Boom Strains Lithium Supplies After Prices Triple
Investors from JPMorgan Chase Co.
to BlackRock Inc. are trying to make money from the exploding
popularity of iPads and increasing sales of hybrid cars by
investing in producers of lithium for batteries.
Prices for the conductive metal, the lightest in the
periodic table, have tripled since 2000 in a market now worth $1
billion a year as uses expand in vehicles, ceramics, electronics
and lubricants. Apple Inc. (AAPL) (AAPL) and Toyota Motor Corp. (7203), maker of the
Prius electric-gasoline car, have few alternatives as they
pursue higher performance and mobility, leading Dahlman Rose
Co. analysts to forecast lithium demand will double by 2020.
Talison Lithium Ltd. (TLH), whose shares have gained 22 percent
in the last month, together with Soc. Quimica Minera de Chile
SA, Rockwood Holdings Inc. and FMC Corp. (FMC) (FMC), account for almost 95
percent of world supply. Rio Tinto Group (RIO), the third-biggest
mining company, may join the largest suppliers if it goes ahead
with a mine in Serbia it says is capable of producing 20 percent
of global output of the metal.
“There are some companies now that we think are attractive
to get a hold of lithium exposure,” Evy Hambro, who manages
about $13 billion in mining stocks for BlackRock in London, said
in an interview. “We’ve got a small exposure today and we’re
looking for some more,” he said without naming any companies.
Demand for lithium-ion rechargeable batteries out of Asia
has helped prices climb threefold in the last 12 years, London-
based Roskill Information Services Ltd. analyst Robert Baylis
said. Global use doubled from 2000 to 2011 according to Roskill,
which has recently consulted on six lithium projects.
Lithium Oligopoly
The advantage of lithium-ion over other battery types is
that a typical cell can generate more electricity than competing
cells such as lead-acid. There is about 1.7 grams (0.6
ounces) of lithium carbonate equivalent in a mobile phone, 2.1
grams in a smart phone and 20 grams in a tablet, according to
Dahlman Rose.
There will be a “step change,” in the global lithium
industry in 2016 or 2017 when electric cars became more
commonplace, Rockwood (ROC) (ROC) Chief Executive Officer Seifollah Ghasemi
said. Hybrid electric vehicles that are fitted with a lithium-
ion battery contain about 1.3 kilograms (2.9 pounds) of the
material, plug-in hybrid electric vehicles have about 12.8
kilograms, while an electric vehicle uses about 19.2 kilograms.
The four-strong lithium “oligopoly has the capacity to
significantly ramp supply higher, but it will take time and
significant capital to accomplish,” Dahlman Rose analysts
Anthony Young and Anthony Rizzuto said in a May 16th report.
“There are a limited number of known high-grade resources that
can be economically extracted and there has not been a new
lithium mine constructed in the last 25 years.”
Biggest Producer
Global consumption may jump to 300,000 metric tons a year
by 2020 from about 150,000 tons now, Dahlman Rose said in a June
7 report. Demand for lithium batteries has been growing at about
25 percent a year, outpacing the 4 percent to 5 percent overall
gain in lithium, the firm said.
“Anywhere between a doubling and a tripling of demand in
the next 10 years is absolutely our view,” Peter Oliver, CEO of
Talison, the biggest producer, said in an interview. “Maybe a
doubling is with minimal impact from electric vehicles and if
electric vehicles take off in a big way in the next 10 years it
could be as much as tripling.”
Neil Gregson, manager of about $6.9 billion in natural
resource assets at JPMorgan Asset Management, said in an
interview in London he’s studying investing in the industry.
“You can’t see any reason why that won’t be a high growth
market for many, many years. It’s a very interesting area.”
Ponce, Kravis
Rio is researching the development of its Jadar lithium-
boron operation at a time when other suppliers are expanding
output to meet rising demand. Talison, the Perth-based company
with a market share of about 32 percent, completed an expansion
at its Greenbushes mine in Western Australia this month that has
allowed it to double production capacity.
SQM, controlled by billionaire Julio Ponce, is the second-
largest followed by Rockwood, which is backed by Henry Kravis’s
KKR Co., and Philadelphia-based FMC. SQM stock has risen 2.1
percent this year, Rockwood 17 percent and FMC 20 percent.
Chile, the second-biggest producing country behind
Australia, last week said it will award 20-year concessions to
exploit lithium brine in salt lakes. The plan allows developers
to mine as much as 100,000 metric tons of the mineral over 20
years, Pablo Wagner, a government undersecretary, said June 12.
Rio’s Jadar project is in pre-feasibility, which involves
conducting studies to better understand the parameters of the
deposit and any social and environmental impacts, the company
said in an e-mailed response to questions.
Rio ‘Excited’
Lithium is “going to be so critical to that future world
of electric vehicles and hybrids,” Tom Albanese, CEO of Rio
Tinto, said April 19 in London. “We’ve got a lot of interest
from Japanese companies, from Korean companies that actually
want to be in the forefront of hybrid and lithium technologies
so I’m actually pretty excited about the project.”
Toyota’s Prius, a niche vehicle when it went on sale 15
years ago, jumped to the world’s third best-selling car line in
the first quarter as U.S. demand and incentives in Japan turned
the hybrid into a mainstream hit. In the quarter, sales soared
to 247,230 cars. While most Priuses sold so far feature a
nickel-metal hydride battery pack, the latest model plug-in
hybrid contains a lithium-ion battery supplied by Panasonic
Corp.
“It’s less than 1 percent of the market now,” Talison’s
Oliver said of lithium’s use in batteries for electric vehicles.
“We do tend to try and portray a fairly conservative view, but
if some of these new technologies take off its going to be a
very exciting time for us.”
Tablet Computers
Since the start of Prius sales in Japan in 1997, Toyota has
sold 4 million hybrid-electric vehicles worldwide, including 1.5
million in the U.S., the company said May 22.
The global market for tablet computers is growing faster
than expected, with Apple’s iPad widening its lead as consumers’
top choice, market researcher International Data Corp. said
June. 14. Worldwide shipments of tablets this year will be 107.4
million units, up from an earlier projection of 106.1 million,
Framingham, Massachusetts-based IDC said.
Worldwide shipments of tablets should reach 142.8 million
next year and 222.1 million by 2016, IDC said.
“One can claim that without lithium, the whole mobile
technology would not have been possible,” Rockwood’s Ghasemi
told a Deutsche Bank AG conference June 13. “You use the
product every single day.”
Golden Goose
Battery-maker A123 Systems Inc. (AONE) (AONE) rose 52 percent in New York
trading on June 12 after saying it had developed an improved
lithium-ion cell that can cut costs of rechargeable and hybrid
vehicles. The new cells will be produced next year and can
perform better in extreme heat and cold than competing packs, it
said.
Expanding battery sales to automakers is seen as the
“golden goose” for the lithium industry, according to Roskill,
and has spurred new entrants such as Galaxy Resources Ltd. and
underpinned expansions by existing producers. Lithium-ion
batteries are the biggest application for the material,
accounting for about 22 percent of use.
“This is an industry which is consumer led,” Iggy Tan,
managing director of Australia’s Galaxy, which made the first
sale of a lithium product last month, said in an interview from
Perth. “Once it takes off it’s a bit like mobile phones, it’s
exponential.”
A123 supplies batteries for General Motors Co. (GM) (GM)’s Spark
electric car, Bayerische Motoren Werke AG’s BMW 5 Series hybrid
sedan, rechargeable and hybrid cars from China’s SAIC Motor
Corp., buses made by Daimler AG and Volvo AB, and delivery
trucks built by Smith Electric Vehicles Corp.
Plug-in Sedans
General Motors’ Chevrolet Volt was the best-selling
rechargeable auto in the U.S. in May, topping Toyota’s Prius and
Nissan Motor Co.’s all-electric Leaf hatchback.
Deliveries of the GM plug-in sedan more than tripled in the
month. Suppliers of lithium have benefited as some car-makers
switch from older model nickel-cadmium batteries to lithium-ion.
“It’s really a new technology and it’s taken some time to
take hold,” Jonathan Lee, a battery materials and technologies
analyst at Byron Capital Markets in Toronto, said in an
interview. “Everything is going to lithium-ion whether or not
it was nickel-cadmium in the beginning or not.”
Rockwood on May 14 proposed a price increase of $1,000 a
ton, or about 22 percent, for lithium salt sold to customers in
the year starting July 1. It said the higher price would allow
it to fund expansion of its mines. Talison’s Oliver said he
raised prices 15 percent in the first-half and is expects to
increase prices again in the second-half.
Hockey Stick
SQM, based in Santiago, said May 30 that sales from its
lithium unit rose 12 percent in the first quarter to $47.5
million after prices gained 16 percent. Prices for lithium
peaked in 2007 before declining through to 2010, according to
Roskill.
Galaxy, which sells to customers including Japan’s
Mitsubishi Corp. (8058), is positioning itself for what Tan describes
as potential “hockey stick-shaped” growth in demand for
lithium batteries. It has built a A$100 million ($102 million)
lithium carbonate plant in China to better serve Asian customers
and made the first sale from the operation last month.
“The outlook for lithium is very strong in light of some
of the uncertainty of other metals such as copper and many of
the industrial metals,” Byron Capital’s Lee said. “Lithium has
grown roughly at 10 to 15 percent over the past two years on a
per-annum basis. We’re having another strong year this year.”
To contact the reporter on this story:
Jesse Riseborough in London at
jriseborough@bloomberg.net
To contact the editor responsible for this story:
John Viljoen at
jviljoen@bloomberg.net
Article source: http://www.businessweek.com/news/2012-06-19/ipad-boom-strains-lithium-supplies-after-prices-triple
Category : iPad News
