Examining the pipeline of production and the impact on supply and demand balances David Merriman Senior analyst

Transcription

1 Examining the pipeline of production and the impact on supply and demand balances David Merriman Senior analyst 7 th Lithium Supply and Markets Conference - Shanghai 16 th -18 th June 2015

2 Disclaimer The statements in this presentation represent the considered views of Roskill Information Services Ltd. It includes certain statements that may be deemed "forward-looking statements". All statements in this presentation, other than statements of historical facts, that address future market developments, government actions and events, are forward-looking statements. Although Roskill Information Services Ltd. believes the outcomes expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include changes in general economic, market or business conditions. While Roskill Information Services Ltd. has made every reasonable effort to ensure the veracity of the information presented it cannot expressly guarantee the accuracy and reliability of the estimates, forecasts and conclusions contained herein. Accordingly, the statements in the presentation should be used for general guidance only.

3 Global lithium supply World: Lithium supply by brine and mineral sources, (t LCE) 200, , , , , ,000 80,000 60,000 40,000 20, Lithium Minerals Lithium Brine Total Production Brine sources continue to provide the majority of lithium supply to the global market Lithium supply from mineral sources increased significantly between 2009 and 2012, after production capacity at the Greenbushes mine was expanded Global supply declined in 2013, as some major producers experienced output disruption before recovering in 2014 to 169,200t LCE Source: Roskill, company data

4 Global lithium supply Main centres for Lithium production: South America Australia China USA Source: Roskill, company data

5 Global lithium supply Lithium production by company, (t LCE) - 10,000 20,000 30,000 40,000 50,000 60,000 Tianqi conversion output FMC Lithium SQM Tianqi Lithium Albemarle Global production of lithium has been dominated by the Big 4 companies since the 1990s. Albemarle is the largest producer of lithium in terms of LCE, with production facilities in Chile, USA and Australia. Tianqi Lithium s production is attributable to its ownership of the Greenbushes mine. FMC Lithium and Albemarle (previously Rockwood Lithium) produce a greater range of lithium products New producers could begin to threaten the Big 4 over coming years, though Big 4 likely to remain core of lithium production in the global industry Source: Roskill, GTIS, company data Notes: Albemarle and Tianqi lithium include attributed production from Greenbushes project. Tianqi conversion output includes past production from Galaxy s Jiangsu Li 2 CO 3 plant

6 Global lithium supply Argentina 25% Brazil 1% Argentina 25% Brazil 0.4% Argentina 18% Chile 74% Chile 75% Chile 82% 100% 80% 60% 40% 20% 0% Rest of world South America The portion of South American production provided by Chile has increased since 2006, reaching 82% in 2014 Reduced output by FMC Lithium in recent years is the result of plant maintenance and optimisation, which has lowered Argentine output Source: Roskill, company data

7 Albemarle: The restructure of Rockwood Lithium Lithium will be included under performance chemicals from 2015 after a reorganisation The metal sulphide, fine chemicals and minerals business is being divested Source: ALB

8 Albemarle: Operations Source: Rockwood Lithium

9 Albemarle: Production and Sales Products Shipped (t LCE) * 2014* Albemarle (Chile) 7,336 17,602 18,372 21,229 23,000 23,000 Lithium Carbonate 5,313 14,579 14,624 17,638 19,000 19,500 Litihum Chloride 2,023 3,023 3,748 3,591 3,000 2,500 Chloride Brine Albemarle (USA) - - 1,000 2,500 4,500 4,500 Lithium Carbonate ,000 1,500 1,500 Lithium Hydroxide ,500 3,000 3,000 Albemarle (Australia) (49%) 15,190 24,063 25,992 29,001 28,500 28,500 Spodumene Conc. 15,190 24,063 25,992 29,001 28,500 28,500 Total 22,526 41,665 45,364 52,730 56,000 56,000 In 2014, Lithium sales by Albemarle in Chile fell for the first time since 2009, reaching 22,933t Sales of chloride brines by Albemarle are expected to decline in 2016 as additional processing capacity at the La Negra plant comes on-stream Lithium sales from Silver Peak also fell slightly in 2014, totalling 4,500t LCE, largely in the form of Lithium Hydroxide. Source: ALB, Roskill estimates Note: Albemarle (Australia) sales are attributable to ownership * = Rounded to nearest 500t LCE

10 Albemarle: Expansions Prior to the purchase of Rockwood Lithium by Albemarle, three expansion projects were in progress: Increased brine extraction at the Salar de Atacama Increase annual extraction capacity to 170,000m 3 py from current authorized extraction of 80,000m 3 py Yet to receive environmental permit approval to increase extraction rate Increase production capacity at La Negra plant Increases production capacity from 29,000tpy LCE to 45,000tpy LCE Expand lithium production in the USA Increase evaporation pond capacity at Silver Peak, Nevada Construction of battery grade lithium hydroxide plant at Kings Mountain Albemarle is considering constructing additional production capacity for battery grade lithium hydroxide in either USA or Asia

11 SQM: Production and Sales Products Shipped (t LCE) SQM (Chile) 21,300 32,400 40,700 45,700 36,100 39,500 Lithium Carbonate 17,130 26,317 33,624 38,261 28,521 32,039 Lithium Hydroxide 2,828 4,562 4,347 4,667 3,432 3,785 Chloride Brine 1,341 1,521 2,728 2,772 4,147 3,676 SQM s sales of lithium products increased by 9.4% in 2014, totalling 39,500t LCE Shipments during incorporate restocking by SQM and its customers Lithium carbonate continues to be the primary lithium product shipped by SQM. Shipments of lithium hydroxide have followed a similar trend to carbonates. Chloride brines are shipped by SQM to China for processing by Ganfeng Lithium Source: GTIS, Company publications

12 SQM: Production and Sales SQM has been delivering increasing quantities of battery-grade lithium carbonate to customers over the last five years Shipments of technical-grade carbonate from included some re-stocking. The share of battery-grade sales at SQM has increased from 41% to 56% since 2009 SQM s share of the global battery-grade market remained at 32% in 2014 SQM: Battery and technical grade lithium carbonate production and share of battery grade market, Source: Roskill estimates

13 FMC Lithium: Production and Sales Argentine shipments of lithium products peaked in 2014 at 18,022t LCE, increasing 38.5% form the previous year Products Shipped (t LCE) FMC (Argentina) 12,515 17,586 13,576 13,217 13,012 18,022 Lithium Carbonate 8,578 11,296 9,896 9,399 8,594 11,517 Lithium Chloride 3,937 6,290 3,680 3,818 4,418 6,505 Shipments from Argentina were reduced in as difficulties during expansion limited output Carbonate is the main product shipped, with FMC shipping predominantly to China, the USA and Japan. Chloride sales in the past were dominated by shipments to the USA (for metal production by FMC), but in 2014 China became the main destination Source: Company reports, Roskill estimates

14 FMC Lithium: Developments Ramp up of production after capacity expansion at Salar del Hombre Muerto in 2014 Completion of new gas pipeline in 2015 expected to reduce energy costs at FMC Lithium's Argentine facilities. Alkali Chemicals divested from Minerals operating segment in April 2015, and the segment renamed FMC Lithium Continued focus of production of downstream high-margin lithium products, particularly butyl-lithium and battery-grade compounds Though constrained by Argentine production, FMC Lithium looking to expand downstream lithium business by purchasing third party materials Assessing construction of additional lithium hydroxide production capacity in either USA or Asia over the coming year

15 USD:ARS FMC Lithium: The Argentine Economy Between 2003 and 2013, inflation in Argentina has averaged over +8.8%py. IMF estimates Argentine inflation in 2014 to rise +19.5%, increasing further in 2015 to over 20.5% High inflation and tightening of foreign exchange controls in Argentina have increased operating costs, with FMC reporting further deterioration of economic and financial conditions could adversely affect FMC s business Argentina: Inflation Index (Base-2000) and % change, e 45% 40% 35% Argentina: USD:ARG exchange rate and Inflation index (Base-2000), e % 25% % 15% 10% % 0% % 0 0 % Change (RHS) Inflation Index (Base-2000) Inflation Index (Base-2000) USD:ARG Source: IMF, National Statistical Office Notes: Consumer price data from December 2013 onwards reflect the new national CPI (IPCNu), which differs substantively from the preceding CPI (the CPI for the Greater Buenos Aires Area, CPI-GBA).

16 Tianqi Lithium: Production and Sales Products Shipped (t LCE) Tianqi Lithium (Australia) (51%) 15,810 25,045 27,053 30,185 29,500 30,000 Spodumene Conc. 15,810 25,045 27,053 30,185 29,500 30,000 Tianqi Lithium (China) (20%) Lithium carbonate Production (t gross weight) Tianqi Lithium (China) - 9,376 20,534 20,777 16,970 19,061 Lithium Products - 9,132 11,063 11,863 11,120 19,061 Jiangsu plant ,471 8,914 5,850 -* Tianqi Lithium has increased its integration both upstream and downstream with the acquisition of Talison (51%), Zabuye (20%) and Jiangsu Lithium Carbonate plant. The acquisition of Talison Lithium in 2013 gave Tianqi control of significant raw material production Purchase of Jiangsu Lithium Carbonate plant from Galaxy Resources in 2014 increased processing capacity by 17,000tpy LCE Source: Tianqi Lithium, GTIS, Roskill Note: Tianqi Lithium (Australia) and Tianqi Lithium(China) sales are attributable to ownership * : production included in lithium products

17 Development Projects

18 South American Projects - Completed commissioning of lithium carbonate plant at the Olaroz Lithium facility in February 2015, - First commercial sales dispatched to European customers in Q Ramping up production to 1,450tpm (17,500tpy), scheduled for completion during late Production from demonstration plant under assessment by POSCO - Construction of potash plant in Jujuy city nearing completion - In discussions with POSCO to use proprietary lithium extraction technologies for the production of lithium carbonate and hydroxide at Cauchari- Olaroz - Demonstration plant operated in partnership with ANSTO in Australia - Extraction method removes need for pre-concentration of brine through solar or thermal evaporation - Plans to commence construction of a 50,000tpy LCE plant in 2015 close to Salar de Ricon

19 Other developments - In January 2015, BBL SpA purchased a 51% shareholding in Minera Li Energy SpA, Li3 Energy s Chilean subsidiary. - BBL to fund Maricunga project through to Feasibility study stage - Awaits new State Policy in Chile regarding development of Lithium assets in Awaiting review of an Environmental and Social Impact Assessment of the Whabouchi mine and concentrator expected during mid Achieved first production of high purity lithium carbonate at demonstration plant in Germany - Updated lithium resource estimate for the Sonora project - Continues to search for a third party to acquire the company s lithium and iodine assets

20 Lithium development projects 2015 Capacity PEA/PFS BFS/DFS Pilot Financing Construction Production Start-up date* (tpy LCE) Orocobre ,500 RB Energy - 20,000 Enirgi group ,000 Neometals ,500 Lithium Americas ,000 Western Lithium ,000 Simbol - 16,000 Nemaska Lithium ,000 Galaxy Resources ,000 Rodinia ,000 Glen Eagle ,000 Critical Elements ,600 Bacanora ,000 Keliber ,000 Total - 287, ,000 World: Forecast additional lithium production capacity at new lithium producers, , (tpy LCE) 200, , N/A Additional Capacity (tpy LCE) Cumulative Additional Capacity (tpy LCE) Source: Company data, Roskill Notes: * = estimated

21 Lithium demand World: Forecast consumption of lithium by end-use, (t LCE) Optimistic outlook of 16.6%py = 420,000t LCE Base-line growth of 9.6%py = 290,000t LCE EV growth of 43%py = 57,200t LCE Other battery growth of 12.8%py = 90,000t LCE Underlying (non-battery) growth of 3.4%py = 143,000t LCE Source: Roskill

22 Capacity Demand Balance Additional capacity from existing and new producers is sufficient to satisfy even optimistic demand forecast Capacity expansion at new lithium producers expected to form majority of increase 500, , , , , , , , ,000 50,000 - World: Forecast lithium demand and production capacity by type, (t LCE) f 2016f 2017f 2018f 2019f 2020f Brine Production Mineral Conversion Technical-grade minerals Compounds from recycling Base case consumption Optimistic scenario Pessimistic scenario Source: Roskill

23 Supply Demand Balance Actual supply is expected to meet base case demand growth with a small supply deficit in 2020 When applying current actual supply estimates, optimistic demand forecast is unsustainable and would require multiple new producers 450, , ,000 World: Forecast lithium demand and production by type, (t LCE) 300, , , , ,000 50, f 2016f 2017f 2018f 2019f 2020f Brine Production Mineral Conversion Technical-grade Minerals Compounds from Recycling Base-case consumption Optimistic consumption Pessimistic consumption Source: Roskill

24 Thank you for your attention!

25 Roskill Research & Consulting Consulting: Market assessments Feasibility studies Industry analyses Acquisition studies Strategic planning Competitive evaluation studies Commercial intelligence Due diligence Contact: David Merriman Relevant reports: 12 th Edition Lithium Market Outlook to th Edition The World Market of Lithium to 2025 Minor metals: Nickel Manganese Cobalt Industrial Minerals: Graphite Fluorspar Boron Soda Ash