Market experts see Tesla’s battery day announcements bullish for lithium

Lithium market participants and observers have generally reacted positively to US electric vehicle maker Tesla’s recent announcements because they support the view that demand for the metal is likely to soar in the medium term, sources have said.

But sources surveyed by Fastmarkets have cast doubts on the potential of the new lithium extraction process announced by the company during its Battery Day event on Tuesday September 22.

Among other statements, during the socially-distanced event hosted outside Tesla’s factory in Fremont, in the US state of California, chief executive officer Elon Musk said that Tesla will mine its own lithium and make its own lithium-ion batteries for EVs.

Musk added that Tesla will continue to buy batteries to supplement its own forthcoming battery product, which was expected to offer 16% more range and six times more power than current batteries.

Tesla announced a simplified process to extract lithium and has acquired rights to mine some of its supply from 10,000 acres in an unspecified part of Nevada, in the western United States, it said.

Musk spoke of the importance of the sustainability of lithium extraction, using this to highlight that this new method to extract the ultralight metal from clay would require salt but no acidic substances.

No details were disclosed on whether any extraction project had already been started.

“Few answers [were given] and I’m curious to see the [extraction of lithium from clay] without acid,” Emily Hersh, partner at Buenos Aires-based mining consultancy DCDB, said.

Lithium extraction in the US
A few other miners were currently developing lithium extraction projects in Nevada.

Canadian miner Lithium Americas is developing the Thacker lithium project in the US region. But it hopes to extract lithium from claystone ore using an acid-leaching process.

The miner expected to release a definitive feasibility study (DFS) on the project in the fourth quarter of this year, according to a company presentation released this month.

Lithium Americas was not immediately available for further comment.

A second miner with a lithium extraction project in Nevada is Australian company Argosy Minerals, which is developing the Tonopah lithium brine project.

“We are very positive [about] some of the commentary by Tesla,” a spokesperson for Argosy Minerals told Fastmarkets.

“Notably, Tesla directly sourcing lithium chemical products from North America, and specifically Nevada… They said how important it is to source locally for their move into battery cell production,” he added.

“The mass production of EVs by Tesla will require a lot more lithium chemical product than is currently produced, and projected to be produced in coming years, so lithium battery-grade demand will increase substantially,” he said. “Other EV manufacturers will also be looking to raise their production rates, which will further increase demand.”

Other sources actively involved in selling and buying lithium compounds echoed this opinion. But the only lithium producer currently active in North America is Albemarle, which has a brine-based extraction facility at Silver Peak, also in Nevada.

Daniel Jimenez, partner at Chile-based consultancy firm IliMarkets, expressed doubts about the extraction of lithium from clay using salt, and its projected low cost, as announced by Musk during the Tesla event.

“[Mass adoption of] EVs is coming faster, driven by [economies of] scale and lower costs,” Jimenez said about Musk’s ambitious plan to reduce battery production costs. This had the ultimate objective of slashing the cost of EVs, which would speed their uptake compared with traditional internal combustion engine (ICE) vehicles.

“A localized supply chain might be good from a safety/geopolitical perspective, but not necessarily on cost. But it will happen,” Jimenez added, referring to Tesla’s hopes to vertically integrate and localize supply chains.

Lithium prices hold steady
While the share prices of lithium producers dropped after Tesla’s event, with Musk noting the “massive amount of lithium on earth,” the prices for lithium chemicals shrugged off any such effect.

China is one of the most liquid markets for lithium spot activity and is where most of the conversion capacity is based. Market participants there said that they expected a limited effect on lithium prices to result from Tesla’s announcements.

“Tesla’s Battery Day hasn’t had any significant effect on the current lithium market. They mentioned trying to lower battery production costs… by reducing the use of cobalt, but lithium is still needed all the time,” a cathode maker said.

“Tesla will set up a cathode materials factory in North America, and will build a lithium conversion plant there as well,” a second cathode maker added, “but it will take a long time to realize this, so I don’t think there will be any effect on the current lithium sector.”

Fastmarkets’ most recent assessment of the price of lithium hydroxide monohydrate, 56.5% LiOH.H2O min, battery grade, spot price, cif China, Japan & Korea, was $8.50-9.50 per kg on September 24, unchanged week on week.

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