Lithium currently shines in a role of hottest element, making headlines everyday but in contrast to important commodities, its production seems to be tracked much less closely.

Only USGS (United States Geological Survey) publishes its report covering worldwide lithium production year by year for free.

But surprisingly does not include US lithium production in its estimate.

Arguing that:

“The only lithium production in the United States was from a brine operation in Nevada”.

“Domestic production was withheld to avoid disclosing company proprietary data.” (source)

This “secrets of national importance” seem to be treated more lightly by 2 NEWS “Coverage you can count on” (Yes, indeed, you can, even if you are in lithium business!)

In an article from 1st February 2017 on Silver’s Peak Lithium mine, it is written:

“The mine currently produces 3,500 metric tons of lithium per year, with the capability to produce 6,000 metric tons. The mine intends to increase its production as the demand increases.” (source)

Roskill and CRU, brand name research/consulting companies in commodities sector also seem to be tracking lithium market closely, periodically producing paid for reports. Hence one has to pay to really see what is in there, and maybe (but not surely) find a magic number.

Roskill and CRU analysts commentaries and charts often figure in mainstream media articles on lithium, frequently published on the wave of general public’s rising interest.

Yet despite looking intensively for lithium production level for 2017, I have not found anything quoted (it does not prove it is certainly not there, though).

In mainstream press, including titles as Bloomberg and Reuters, there is much talk about forecasts for the next years, capacity, market share by leading producers, but if you look for something as tangible and solid as lithium production level for the last year.. good luck in finding it.

When we look at the publicly available excerpt from Roskill

“During 2017, the supply of lithium raw material changed significantly, with the ramp-up of production at lithium hard-rock operations increasing mineral concentrates production in Australia to greater than 157kt LCE, compared to ~75kt LCE in 2016. The increase in mineral concentrate production and start-up of direct shipping ore (DSO) shipments to China has improved raw material availability for mineral conversion facilities, which are increasing production capacity. In 2017, refined lithium capacity totalled ~340ktpy LCE, dominated by China-based mineral conversion facilities and lithium brine operations in South America. More than 370ktpy LCE of lithium mineral conversion capacity and 120ktpy lithium brine capacity has been identified by Roskill with the potential to come online at existing and new operations by 2020, although it is unlikely that all of this capacity increase will be realised.” (source)

The talk is about production from Australia, in terms of mineral concentrate and about capacities.

What % of production capacity is used in the lithium industry is a tough question to answer.

On one hand most of major producers talks about increasing capacity, by upgrading existing production facilities to meet market demand. Yet indeed, if the upgrade is performed on the facility which is currently in operation, it may negatively impact volume of current output.

In Chile, producers constantly seem to approach a regulator to increase the quotas, what would suggest that they are using existing capacity to the fullest.

Yet if we look at the production capacity in Chile for 2017, from publicly available sources it amounts to 96 800 MT LCE, while if we look at Chile’s trade statistics, the total of 70 801 MT LCE has been exported in 2017. It does not seem viable that the total of almost 20 k of LCE has been consumed domestically. Considering also difficulties related to a storage of lithium compounds, which makes LME plan for cash settled Lithium contract instead of contract for delivery in LME warehouse as it is a case with majority of metals listed, it is unlikely producers keep such large stocks for so long.

When we look at USGS report they state:

“Worldwide lithium production increased by an estimated 13% to 43,000 tons in 2017 in response to increased lithium demand for battery applications. Consumption of lithium in 2017 was projected to be about 41,500 tons.” (source)

43,000 tons of lithium content equals approximately 228 889 MT LCE. If we add production in Silver’s Peak, according to 2 NEWS we get 247 520 MT LCE. Is this a best number we got?

BMO Capital Markets estimated lithium production in 2017 at 244 000 LCE 2017 (source). McKinsey report is quiet interesting because it estimates:

214 000 LCE 2017 lithium demand

216 000 LCE 2017 actual production

While estimating 2017 spare capacity at mind boggling: 231 000 LCE in 2017! (source)

So would that be correct to interpret that with demand at a level of 214 000 LCE and existing capacities in place the world could produce the total of (216 000 + 231 000) 447 000, if industry only wanted to?

Then why the rush to bring more capacity online with such a fast pace if when looking at these numbers it seems that if everybody produced according to maximum capacity in 2017, demand in 2017 would only consume 48% of production.

McKinsey is not the only research company who talks about large spare capacity in 2017. If we look at power point from Roskill, page 15:

https://www.geolsoc.org.uk/~/media/shared/documents/Events/Past%20Meeting%20Resources/Lithium/Dave%20Merriman.pdf

“Capacity utilisation <50% in
2017, historically ~70-75%;”

For me it is not quiet clear from the slide, does this statement relates to “Existing spod. converters with Australian/domestic feedstock” or to lithium production capacity utilization in general?

Nevertheless, the recurring topic of low capacity utilization in market which is perceived as booming makes you think..

Anyway, I digress. When you look at the precision of coverage of production level, of macro-economically and geopolitically important commodities as crude oil or grains, the sheer number of publicly available sources, frequency of the releases of statistics during a year and a level of discussion of the output levels in mainstream media, it does not compare to what we have at the moment on the lithium market. While I would argue, the geopolitical and macroeconomic importance of lithium in XXI century is hard to question.

Lithium Today is working on the initiatives to improve this situation: independent research on production volumes (we look for organizations who would be interested in sponsoring it, so it can become available for free in public domain – it is also a great branding opportunity) and tracking of lithium production with a use of satellite imagery. Please contact us, if any of these ideas spark your interest!

 

 

 

 


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