Institutional investors can join our live chat on Bloomberg, a groundbreaking venue since 2010 – now with clients in 20+ countries, just email firstname.lastname@example.org – Thank you.
Lawrence McDonald is the New York Times Bestselling Author of “A Colossal Failure of Common Sense” – The Lehman Brothers Inside Story – one of the best-selling business books in the world, now published in 12 languages – ranked a top 20 all-time at the CFA Institute.
China – 3000 Coal Plants – Come with a Price
Half of China is stressed by drought – rice crops and lithium production are in danger – all threatened by the worst heatwave on record. Southern China records its longest continuous period of high temperatures since records began more than 60 years ago — above-average temperatures even touching the normally chilly Tibetan Plateau.
In Q1 2022 – Out of pocket, Tesla owners were dealing with costs of around $10,000 to $13,000 for the battery itself, depending on the model. Now, after the latest surge – what are the implications?
On planet Earth – China is now the third biggest producer of lithium behind Australia and Chile. The stakes are sky-high. Per Bloomberg – China accounts for about 60% of the world’s production of refined lithium, so Sichuan’s power crunch is a wake-up call for the global lithium and battery-material industries.
Dear Elon, Who Pays for This?
The lithium-refining spread — the price of lithium carbonate (LCE) or hydroxide minus that of spodumene concentrate — may surge through end-August. Bloomberg Intelligence notes the volume loss in lithium carbonate/hydroxide due to Sichuan’s drought-induced power crunch could amount to 12% of China’s monthly output, that´s after factoring in electricity rationing until Aug. 25. This would further tighten the market, already in severe shortage. Downstream demand among iron-phosphate and nickel-cobalt-manganese cathode makers has also been hit by power cuts, but the impact is smaller than for lithium refining. Sichuan’s lithium-hydroxide and lithium-carbonate production capacities are about 40% and 15% of China’s total. This winter, brine-based producers in West China may have to halt output as lakes freeze, adding to upward pressure on prices.
The EV Dream is Still Alive?
We are lectured weekly – Electric vehicle sales could reach 33% globally by 2028 and 54% by 2035. Really? Mining needs to grow 30X by 2040 to meet CO2 reduction goals using solar, wind, & batteries. Lithium production needs to increase by 40X. – Oklo data.
Where are We Now?
EVs accounted for less than 8% of global sales last year, and just under 10% in the first quarter of 2022. Large players – automakers and suppliers now expect to invest at least $550 billion on EVs and batteries from 2022-2026. That is more than double the five-year EV investment forecast of $230B from 2020-2024.