What’s powering the lithium boom?

" The Chinese are that desperate for lithium right now that they are prepared to take ore right out of the ground."
Matt Birney, Bulls N Bears

The increase is being explained by the rise in demand for lithium batteries for devices and solar storage - from Tesla to an increasingly solar-dependent China. Is it too soon to call it a boom?

Daniel Hynes, senior commodities analyst at ANZ said when put it into context of growth rates in other commodities, lithium “does stick as being quite promising”.

Although “there’s definitely a bit of hype mixed in with this whole thing,” he told bluenotes. “These changes and shifts in consumption patterns and the like can take quite a long time to evolve.”

Growth from one lithium mine in Western Australia to seven by the end of 2017 is impressive but is still small compared with the 190 or so total mines in the state - albeit some of these in care-and-maintenance mode.

Matt Birney of online stock news site Bulls N Bears told bluenotes all the large lithium players in the state - Neometals, Greenbushes, Pilbara Minerals - sell directly to China.

“The Chinese are that desperate for lithium right now that they are prepared to take ore right out of the ground,” he says. “The Chinese have just done a direct ship deal with Pilbara Minerals just to get their foot on supply.”

Greenbushes

Western Australia is already home to the world’s largest lithium mine, Greenbushes, a joint venture between the US’s Albemarle and Tianqi Lithium in China and there are plans to double production by the middle of 2019 to 160,000 tonnes per year.

Albemarle and Tianqi are some of the largest lithium producers in the world, along with Sociedad Química y Minera de Chile (SQM).

The evaporative basins in South America differ from Australia’s deep digging into harder Pilbara rock but that has its own challenges as the lithium needs to be refined from spodumene and currently - as with iron ore - Australia sends it to China.

The established Greenbushes has company with six new ventures for 2017, many of which are working with Chinese companies.  Shareholders in Altura’s Pilgangoora project include battery producer Shaanxi J & R Optimum Energy with a 19.9 per cent share.

Altura is selling 100,000 tonnes of its spodumene concentrate to China’s Lionergy for the next five years. China’s Ganfeng Lithium has a large stake in the Mount Marion lithium project which has been shipping since January.

What is driving the demand for lithium? China’s desire for the devices powered by lithium batteries, certainly, but also battery storage for solar and other renewable energy sources.

China's solar ambitions have been galloping ahead, with the country installing the US total solar in one year alone according to reports.  

Five-year plan

China’s current Five-Year Energy Plan (2016 - 2020) mandates 15 per cent of the country’s power come from non-fossil sources. That is just the state grid and doesn’t taking account of the rapid uptake of residential solar and solar panel production for the global market.

China hit ‘peak coal’ in 2013 and has been scaling back its production since (last year’s third-quarter coal price surge which delighted Aussie miners was down to China cutting its domestic coal production to get rid of unsafe or unprofitable smaller mines).

“The first to notice is that is really is a big deal there. Air quality is the water cooler topic... the ‘hotpot stopper of China (in reference to John Howard’s ‘barbecue stopper’),” Rod Campbell, of think tank The Australia Institute in Canberra told bluenotes.  

“It really is a big deal and public opinion really counts.”

Dr Sam Geall, a China energy expert with Chatham House, wrote on Lowy’s Interpreter blog last year Chinese policies that “only a few years ago would have seemed unimaginable (from massive installation targets for solar power, to an absolute cap on China’s total coal consumption and a fixed peak year of 2030 for the country’s carbon dioxide emissions) are now part of China’s push towards what its leaders call an 'ecological civilisation'.”

Dr Geall told bluenotes China is “reaping the benefits of a long-term innovation policy, which made renewables a strategic priority.”

“It now leads the world in renewables investment, and increasingly in innovation and patents,” he says. “We now see the price of solar PV falling worldwide, thanks in large part to the scale of manufacturing in China and the competition between firms.”

And it is also one particular use of ion batteries: electric bicycles, says Geall.

“Electric vehicles, and particularly electric bicycles, with lithium ion batteries, have expanded enormously in use in Chinese cities and are now ubiquitous,” he says.

The Financial Times quoted analysts at Morningstar saying they “expect lithium demand to rise 16 per cent a year from 175,000 tonnes in 2015 to 775,000 tonnes by 2025 — an increase they say would be the fastest of any significant commodity over the past century. They forecast a supply shortfall of 100,000 tonnes of lithium by 2025.”

It also noted an Australian company with a small lithium holding in western Africa sold it for $US78 million, “or more than 2,000 times the amount it paid for the deposit just 11 months ago.” It sold to a Chinese company, again highlighting the sudden Chinese demand for the metal.

Hynes thinks global lithium demand is not all China.

“I’m not that confident that we’ll see the growth in Chinese demand exceeds other market... it does appear it’s going to come from other, more mature markets, Europe and the US and Japan,” he says.  

“That’s not to say that we’ll see some strong numbers come out of China in the next few years.”

Birney says the worldwide lithium market is just getting started.

“The innovations in solar power mean that the sun doesn't need to be out for anything connected to the solar grid to function, meaning the lithium market will expand fast,” he says.

For WA it is a boom.

“The four largest hard rock lithium deposits in the world are in Western Australia -- Pilbara Minerals, Greenbushes, Kidman Resources and Neometals,” according to Week in China which also added a caveat” “China also has its own serious lithium reserves.”

That will be a factor to watch.

“China is believed to be sitting on one of the world’s largest lithium reserves, with an estimated 3.2 million tonnes, the United States Geological Survey said in January last year, or more than double the size of Australia’s estimated reserves,” the journal said.

Helen Clark is a freelance journalist