Gigafactory Plans May Lead to Lithium Shortage

Comments (8)

  1. John Galt says:

    Tim Maverick appears to be a newcomer to lithium supply and demand analysis. Lithium hydroxide (the lithium raw material Tesla’s batteries contain) price going to NCA cathode produced by SMM – Panasonic’s main supplier, was well over $8,000 in 2012. This seems but one of several gaps in the author’s knowledge.

    Due to Rockwood’s new battery grade hydroxide plant in North Carolina, competition increased and prices were much lower in 2013 and 2014.

    FMC announced the sale of the Minerals business (including lithium) but had to back away as selling the soda ash business separately became a requirement to raise cash for an Ag acquisition. Lithium will likely remain in FMC only until they can figure out how to divest.

    Some analysts realize FMC announced a price increase in hydroxide because their costs continue to rise – not because of market demand. FMC’s total lithium profit contributes less than 5% of total company profit. So why is FMC a good vehicle for investing in lithium, Tim?

    Tim seems confused who uses lithium carbonate based cathode for lithium ion batteries and who uses hydroxide.

    Yes, Tim, Tesla’s batteries need lithium hydroxide but at Tesla’s projected car production projection that is still less than 6% of global lithium demand in 2015. A Tesla model S with an 85 KWH battery uses less than 50kgs of lithium hydroxide.

    The math is quite simple.


    Tim Maverick Reply:

    Thanks for your thoughtful and detailed comment! I’m guessing you are a short-term trader. Yes, prices were lower in 2013 and 2014, but the whole argument made by the analyst, which I believe, is that there will be actual shortages in hydroxide in 2015, which will raise prices. You are correct that FMC plans to spin off the minerals division into a company called FMC Minerals – I totally forgot about that. But they are spinning it off to hopefully have its value appreciated by the marketplace and to create more value for its shareholders, much as BHP Billiton plans to do with assets the stock market doesn’t really realize have value. Many market analysts believe Tesla’s gigafactory will raise overall lithium demand by 100%. So the 2015 numbers mean nothing as the gigafactory will begin production at the end of the decade.
    -Tim Maverick


    John Galt Reply:


    You may be a skilled investor in some areas but you are clearly out of your wheelhouse here. I am not a trader I am an investor that spent much of my working life in and around the lithium business.

    No competent market analyst thinks Tesla’s Gigafactory will double global lithium demand. I think you are confusing lithium demand with lithium hydroxide demand which is less than 25% of global lithium demand stated in carbonate equivalents (LCE). If you have a reference by anyone for a doubling of demand – please provide details.

    You also seem not to understand that Tesla plans to be selling approximately 250,000 cars BEFORE the Gigafactory is operational. Panasonic is already trying to source lithium for NCA cathode 12-18 months ahead of demand. All that upward pressure is just getting the battery quality hydroxide price back to 2012 levels and that is before the entry of the Chinese into the Tesla supply chain.

    The Chinese have been excluded from this part of the market (due to quality concerns that are being addressed) but are being brought in because neither supplier (FMC/Rockwood) has started the putting steel in the ground for future demand growth. The Chinese entry will put downward pressure on the price yet again because they are willing to sell below battery quality market price to gain share despite the 17% VAT penalty they pay to export.

    China has more hydroxide capacity than FMC, Rockwood and SQM combined. Globally hydroxide prices will go up on the low end (grease market) before they go up significantly on the high end.

    The Gigafactory will cannibalize the existing lithium demand for Tesla’s batteries when it opens. Stated another way – somebody (SMM) will already be making the cathode and using the lithium for at least half of the battery demand that will move to the Gigafactory. Of course, the Gigafactory when fully operational adds to demand but the impact is not that of new demand for 500,000 cars because a good part of that demand will exist beforehand. The site of battery manufacture is simply changing locations.

    Thanks for starting the discussion on the issue but please either do your homework or write about something else. Your comments are not helping add to investor knowledge. Feel free to respond I will not write on this point again so you have the floor for a final word.


    Tim Maverick Reply:

    Thanks again for your comment. I stand by my response above. Simon Moores is one of the most respected in the business, I trust his judgment.
    -Tim Maverick

    John Galt Reply:

    Interesting that you are relying on the word of analyst who never worked directly in the lithium industry. Wall street rules….

    Nigel Swain Reply:

    It is worth looking at a recent Lithium discovery in Mexico. Estimates are that is most likely to be the World’s largest open pit mine. Two companies currently involved are BANCORA BCN.L and Rare Earth Metals REM.L


    UK investor Reply:

    Nigel – looks like you were on the right lines with that comment back in Dec’2014


  2. UK investor says:

    First long-term supply agreement for Lithium Hydroxide to the Tesla Gigafactory just announced. Proposed mine for Sonora Project in Mexico run by partners which are both London AIM listed companies, Rare Earth Minerals plc and Bacanora Minerals. Don’t confuse REM with similarly named US companies.

    Press coverage



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