EDITOR: | October 20th, 2016 | 6 Comments

Rock, Paper, Scissors – Lithium Kills Lead Dead

| October 20, 2016 | 6 Comments
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In recent weeks I was summoned to give a briefing to one of the largest companies in Germany on their Futurology project as it relates to mining over the next 15 years. I was almost confounded when they asked me which metal we will not need to mine at the end of the designated period. After a brief reflection the answer seemed obvious and that metal was Lead. Even they were taken a bit aback as Lead has been part of human endeavour and industry since the earliest days of human civilization.

The logic though is that Lead is a metal with a strong (or indeed the strongest) component of recycling in the metals space. This implies that the existing stock of Lead, which is primarily “stored” in the world’s stock of Lead-acid batteries is infinitely recyclable. Very few batteries escape the recyclers tender mercies after a vehicle has gone to the Great Beyond. This implies that most Lead mined now goes to meeting incremental demand for automobile batteries.

lead_recycle

This begs the question of what happens to Lead mining when the amount of Lead recycled equals the amount of Lead required for traditional applications if the usage in Lead batteries starts to go into reverse? The rise of the Lithium-ion battery and the electric vehicle seems destined to hasten that day.

Lithium – Out with the Old

The macro trend that is ringing the death knell for Lead’s once mighty position is the rise of Lithium and moreover the potential of the surge in electrical vehicle penetration to make some countries “combustion engine free zones” by 2030. This is not a pretty scenario for Lead. As cars are getting lighter one of the heaviest components (the lead battery) is also the most retro in its contribution to moving people forward.

Even the industry thinktank, the International Lead Zinc Study Group (ILZSG) has grasped the extent of Lead’s dilemma: Their latest projections cite the dangers for Lead demand as:

  • Lead‐acid already losing market share to lithium‐ion in some stationary battery sectors
  • Pressure from auto‐makers to develop more efficient and robust batteries
  • Main challenges for lead‐acid are Dynamic Charge Acceptance (DCA) and shallow cycle life
  • Competition with lithium‐ion in auto‐batteries intensifying as costs come down (eg. Tesla)

The rise of China and the desire of its middle class for automobiles was a phenomenon which gave Lead demand its one last boost over the last decade. Even at the lower levels in China though we see Lead starting to go into eclipse. In the chart below we can see how in electric bicycles, used by the lower echelons of the Chinese economic pyramid are expected to decline in absolute terms and the share held by Lead-acid batteries to face growing replacement by Lithium-ion batteries.

ebikes

This chart humble as it is shows the most disturbing trend. If one looks at 2019 consumption of Lead for this product it is back at 2010 levels. This might imply that the scrapping of ten year old bicycles will, by the end of this decade, provide all the Lead needed for new bicycles using Lead acid batteries. Here we see in microcosm that Lead will be a zero-sum game with a “closed-cycle” of Lead recycling ultimately serving most, if not all, “new” demand for Lead.

If countries move en masse to adoption of EVs over combustion engines (as we should expect in China by 2030) then not only will most demand for Lead batteries be removed but there will be a massive flowback of Lead from existing vehicles being scrapped. This will remove all incremental demand for Lead and provide “surplus” Lead for which we cannot foresee any new application.

The Zinc Conundrum

The demise of Lead that we posit here has an interesting implication for Zinc mining. As is well-known I am an unreconstructed bull of Zinc. Traditionally Lead and Zinc and Silver have appeared in the same mines (to varying degrees) and have either pulled together or pulled against each other in the economic equations that make those mines viable. That begs the question of what should happen to the economics of existing or planned mines should Lead become something akin to a zero in the algebraic calculation of the economics of a mine. Moreover if the Lead cannot be sold then what does one do with it?

The table below shows the perilously poised nature of the Lead market.

lead_2016

However, since those April projections, supply has exceeded demand by 48,000 tons on the global lead market from January to August, according to more recent statistics from the ILZSG.

As we all know there have been reductions in the output of Zinc/Lead mines due to mines closing or being mothballed. This has propelled the Zinc price substantially higher but left Lead, not unjustifiably, wallowing.

lead_mines

Thus if even mine closures can’t help Lead then what can? One thought that crossed the mind was that if Lead’s price declined enough then recycling may lose its viability (despite government demands that Lead batteries be recycled rather than go to landfill etc).

The rosy lining to Lead’s demise is that Zinc mines will need to be justified by an even higher price than the currently projected sweet-spot of $1.20 per lb or above because Lead will not be contributing much or anything to the equation. This implies an even bigger boost to Zinc and a hunt for the type of mineralogy in deposits that are high-grade in Zinc (and silver) and relatively lower grade in Lead. A hunt for a unicorn maybe?

Conclusion

If this was the film Gladiator then Lithium would be played by Russell Crowe and Lead would be some aged actor destined to be crunched on the head with a spiky ball and dragged from the arena to be fed to the beasts awaiting below. This will not be the first time that a mineral or an alloy thereof has gone out of fashion. Bronze is not what it was and pewter is scarcely employed these days. Thorium once had widespread usage in gas mantles to the extent there was even a cartel that dominated its trade.

Lead though is one of the 800lb gorillas of the base metal space and its demise (or substantial sidelining) will make waves because of its intimate connection with the Zinc and Silver mining business. Lithium comes out with the laurels from this David & Goliath slugfest. Like all new champs though, it needs to watch its back for new contenders arising as the airwaves are thick now with talk of Manganese, Antimony and all sorts of other exotic combinations that will continue to make the battery space a veritable ferment of new technologies.


Christopher Ecclestone

Editor:

Christopher Ecclestone is a Principal and mining strategist at Hallgarten & Company in London. Prior to founding Hallgarten & Company in New York in 2003 ... <Read more about Christopher Ecclestone>


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Comments

  • Tim Ainsworth

    Now that is an interesting piece thnx Christopher, and a great illustration of the thinking required looking forward, much of the perceived bedrock could well prove quicksand for the complacent, timely reminder.

    October 20, 2016 - 10:50 PM

  • Carlo

    Platinum could be in a bit of bother too. Biggest use by far is in fuel vehicle catalytic converters. If EVs replace FVs, and they will, then…

    October 21, 2016 - 4:31 AM

  • Christopher Ecclestone

    Carlo,

    Pleased you mentioned that. It was the Germans next question. In that metal it might be a case of a secular decline in production (in Sth Africa and Russia) matching falling demand in a race to the bottom.

    October 21, 2016 - 4:56 AM

  • Jack Lifton

    Christopher and Carlo,

    Recycled platinum group metals already contribute 40% of the automotive demand. If internal combustion engines now go into decline and ultimate eclipse there will be no further need for mines thousands of kms deep recovering “ores” with just a 100 or so ppm. The hidebound platinum cartel is already singing “platinum jewellery is a girls best friend” as mining of PGMs declines and prices sink. Please don’t bring up fuel cells. They would each need an ounce of platinum, which would limit their use to 10,000,000 units per year of all of the newly mined platinum for that year.

    Lithium being on the upswing needs to be conserved by recycling as its demand could easily exceed supply. Closed loop management of the materials of construction of lithium ion batteries should be made mandatory immediately to help close the demand supply gap

    Jack

    October 21, 2016 - 6:40 AM

  • Tylemahos

    Hi Christopher. Thanks for your thoughts. Someone needed to say it. And someone needs to disagree – as I believe disagreement should be used to initiate vibrant discussion. Too many view disagreement as an offence to a point of view, which normally ends the ‘discussion’.

    I don’t agree with the conclusion that mining of lead is over due to lithium. Firstly, looking at the history of lead acid, it has been recycled almost it’s inception, but not because people were interested in saving the environment. Recycling lead is profitable, however recycling of all other batteries is not. Nicd were possible of profitable recycling at one point, but reduced supply and movements by govt’s to ban (i.e EU directives on cadmium and mercury use for eg) have ceased making this profitable as well. Jack Lifton mentions lithium recycling – again this could only be possible by subsidizing the industry, and most subsidies today are funded by upfront taxes at the point of sale – which places the ‘green’ movement between a rock and a hard place. For eg, how to displace ICE and fossil fuel by increasing the cost of EV and HEV for the sake of funding and subsidizing recycling at the other end? The goal is to reduce cost of EV/HEV if the endgame is disruption of ICE.

    Will try to keep it brief so your eyes don’t glaze over – but two other ‘fundamental’ issues to consider. Engineering of todays vehicles, such as the Start-Stop designs of HEV and now even ICE vehicles. Lead Acids are subjected to more stress as a result of this design, which diminished it’s useful life.

    Likewise, the design of the Lead-Acid battery itself. There are two ‘mainstream’ chemistries – Lead/Antimony and Lead/Tin. Notwithstanding that Lead/Tin can last much longer than an antimony chemistry, no one wants to pay the additional cost, hence seldom are made and used in comparison. This means we have a Lead/Acid recycling market flooded with Lead/Antimony batteries. And therein lies my disagreement that Lead Acid is not dead.

    You can’t completely clean out the antimony from a lead/antimony alloy – in the very least ‘trace’ amounts remain, and trying to get rid of the antimony completely reduces the profitability of the lead/acid recycling business thru increased costs.

    The rub? Lead/antimony alloy cannot be used in the anode plate of the lead acid battery due to its corrosive characteristics.

    Look at this as a positive. I’m very bullish zinc – so lead/zinc deposits will be profitable for some time imo. Fingers crossed it’s decades.

    October 24, 2016 - 7:58 AM

  • Joe O

    RE: lithium recycling and MRT Ucore stock price has been dwindling down

    either its going to be a good buying opp or things arent developing as planned
    It doesnt seem like bokan is going to be in play for at least next few years
    all eggs in the recycling tailing etc. space
    Hoping for the best dont know if I nibble one more time when its breaks 20 cents

    October 24, 2016 - 3:11 PM

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