Tuesday, May 10, 2016

Mr. Lithium visits Argentina



First a brief recap of where we are. Over the past five years capacity additions of approximately 80K MT were expected: Galaxy’s Jiangsu, China plant was supposed to have a capacity of 17K MT. It has been sold to Tianqi and is still producing well below nameplate. Albemarle/Rockwood’s 20K MT expansion at La Negra was delayed. FMC’s “30%” expansion didn't result in increased output although a lot of capital was invested. Canada Lithium/RB Energy’s 20K MT plant was the biggest lithium failure in history. Finally, Orocobre's 17K MT project at Olaroz that was supposed to be producing “at capacity” at various dates depending on which of their announcements you read last- is still in an extended "start-up". Of the projects listed only about 18K MT of the anticipated 80K MT is currently in production.

Meanwhile, on the demand side, lithium in “electric transportation” seems to have finally gained traction (no pun intended) and the “era of ESS” seems ever closer. Demand for LCEs (lithium carbonate equivalents for new readers) will likely grow ~15K MT this year and continue to grow at an increasing rate which ultimately means a new 20K MT plant will be needed about once a year over the next few years. Growth from 2020 to 2025 will be at a much faster pace. My demand estimates are lower than the estimates of many others such as Goldman Sachs. The “bottom line” is that absent a complete collapse of demand growth – the world NEEDS Argentina to at least achieve brine production parity with its neighbor to the west (Chile, to those of you who may be geographically challenged). 

Great article and things are looking good for lithium producers. One takeaway is the comment Mr. Lowry had on Orocobre. I am taking his remarks under advisement and liquidating my remaining Orobobre shares. I will be rolling the funds over into Galaxy Resources as it has better potential. 

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