Lithium: The Haves and the Have Nots
Too little attention is being paid in all of the chatter, both informed and uninformed, about a lithium supply “deficit” and its longevity, to the culling of both battery and vehicle manufacturers that such a deficit would (will[?]) entail.
There is not even the remotest possibility that global lithium (measured as metal) production could grow to this week’s prediction, for example, by the child-like prognosticators at Deloitte, that in 2030 32% of all newly manufactured motor vehicles would be battery electric vehicle (BEV). Even assuming no growth in total OEM automotive production, a CAGR of zero, there would be 100,000,000 cars and trucks manufactured in 2030, and, under this prediction, 32,000,000 of them would be BEVs. Using an average lithium-ion battery capacity per vehicle of 100 kWH and the requirement of 16 kg of lithium per 100 kWH this means a need in 2030, just for BEVs and excluding stationary storage (the so far un-named gorilla in the battery needs zoo) and personal portable electronics, of 512,000 tons of lithium or six times the new production level of 2020!
China’s new economic plan “only” calls for 20% of its domestic OEM automotive production in 2025 to be BEVs. Again assuming no growth in OEM automotive output from 2020 levels this would mean the production in 2025 of 5,000,000 BEVs in and for the Chinese domestic market. This would require, under the above usage of Lithium requirements, 100% of the lithium produced in 2020. But China is different. Today, in 2021, it already controls (owns or owns the output of) 60% of global lithium production and has today 82% of the global installed capacity for manufacturing lithium ion batteries of all types. Assuming that 65% of current lithium production is used for lithium ion batteries and the 100 kWH size of the average car battery and that it takes 9 GWH of battery making capacity to outfit 100,000 BEVs, this means that China today, with its installed capacity (in 2021) of 455 GWh of battery making capacity, could already produce 5,000,000 BEVs a year domestically. In other words, China today has already enough battery making capacity to match its current supply of lithium that is allocated to BEV battery manufacturing, and, further, to already be in a position to achieve its 2025 target production of BEVs!
There’s really no comparison between the efficiency and effectiveness of China’s mandarins as state resource allocation experts/executives and the bureaucrats/advisors of former Soviet Russia or today’s Washington and Brussels.
China continues to acquire global lithium sources, build processing and manufacturing capacity for lithium-ion batteries, and increase production of BEVs to meet long-term state planning goals. In the West bureaucrats “study” the needs for capital allocation to do the same thing.
China seems acutely aware of the balance its needs for steady societal growth (in the standard of living) required when set against its need to allocate capital efficiently to meet security of supply. This is where Western politicians who lack even a rudimentary understanding of economic planning have completely failed in their governance.
Yesterday I heard the chairman of a lithium junior in Argentina criticize China’s Ganfang Lithium, the world’s largest producer of lithium chemicals for batteries, for announcing that it is acquiring ownership of, what he called, a “crap” lithium junior in Argentina, Millennial Lithium Corp. (TSXV: ML | MLNLF: OTCQB). He failed to note that just this year Ganfeng has gone ahead with the building of a 20,000 ton per annum, lithium chloride production plant to be powered entirely by a 120 megawatt (Chinese manufactured) solar cell installation in Argentina, and also agreed to complete its purchase of Mexico’s Bacanora Lithium PLC. Ganfeng with its $120 billion market cap and its own cash along with the permission of the People’s Bank of China is valuing Millennial above its current market price primarily for its holdings and its recent PEA and pilot plant success.
Investing in junior lithium miners is not a bet on the US or the EU’s future demands it is a bet on the value that China puts on its critical resource supply security.
The “free” market allocation of capital in the West is not for the societal benefit it is for economic growth, supposedly for the benefit of society, but increasingly for the benefit of an oligarchy now in control of finance. China seems to be taking a different path to economic growth and perhaps a better one for the long haul.
Jack Lifton is the CEO of Jack Lifton, LLC and is a consultant, author, and lecturer on the market fundamentals of technology metals. “Technology metals” ... <Read more about Jack Lifton>