MasterMetals on Twitter

August 8, 2018

July 4, 2018

#Nickel - #Battery grade material Sees a Price difference emerging due to potential nickel demand for #EV’s

@Scotiabank new report:  "Is The Nickel Market On Its Way to Becoming Bifurcated? Why Understanding Class I, Class II (and the EV Context) Matters…."

 

Attachment 1 shows the 1-year spot price of nickel and attachment 2 the 1-year LME nickel warehouse stocks level.

 

Below is a comment from Scotiabank how the nickel price has been rising on potential battery demand for electric vehicles (EV's).

 

"Is The Nickel Market On Its Way to Becoming Bifurcated? Why Understanding Class I, Class II (and the EV Context) Matters….: In line with the definition provided by the International Nickel Study Group (INSG), refined nickel (class I) includes products such as electrolytic nickel, pellets, briquettes, granulates, rondelles, or powder/flakes with a nickel content of at least 99%. Charge nickel (class II) includes products such as ferro-nickel, nickel oxide, utility nickel, or nickel pig iron (NPI) with a nickel content below 99%. Recall that the difference between the two classes of nickel was recently highlighted by VALE given the company's current frustration in its inability to fully capture the premium for all the class I nickel it produces, because a portion of its higher quality class I output (and class I suitable for batteries) had been being sold to produce stainless steel. Unsurprisingly, VALE is making changes internally to change this and capture more value….

 

 

So, Is there a Shortage of (Class I) Nickel for Batteries? Not for a while in Scotia's view. The growing widespread adoption of electric vehicles (EV) in both the Western World and in China has created significant attention and investor interest in several EV inputs including cobalt, nickel, lithium, and copper. While EV demand for nickel currently represents only a minor ~3% of the market, demand is anticipated to materially increase over the next decade. Although growing non-stainless demand is a very positive long-term backdrop for the market, we do not see a looming near-term supply crunch for nickel. Global nickel inventories, while substantially improved (ie. drawn down) from 2016 levels, still  remain at historically elevated levels. Looking at visible inventories at a more in-depth level, Scotiabank Senior Base Metals Analyst Orest Wowkodaw notes that there are currently 261,000 tonnes of Class I nickel briquettes sitting in LME warehouses, representing 78% of total LME inventories. Conservatively assuming 100% of the nickel stored in Shanghai and in Chinese bonded warehouses is cathode, briquettes represent ~60% of global nickel inventories. The stainless steel industry consumes primarily nickel cathodes but also nickel briquettes, while the non-stainless sector (including batteries) consumes primarily briquettes. In 2018, Orest forecasts only 31% of nickel demand from the non-stainless sector. While he forecasts this consumption mix to only slightly increase to 35% non-stainless by 2022, he anticipates the size of the overall nickel market to increase by 239,000 tonnes or by 11% during this five-year period. On a more positive note, Orest continue to see a looming shortage for Class I nickel developing next decade as EV demand accelerates during a very long period where prices to develop new greenfield nickel supply remains below incentive levels. In his view, the viable greenfield project pipeline for future Class I nickel supply appears bleak. Furthermore, the appetite to develop another large scale multi-billion dollar HPAL laterite project remains practically non-existent.

 

While current visible nickel stocks of 355kt (equal to 56 days of consumption) would suggest there is still plenty of available nickel in the market, the rate of YTD inventory decline has been markedly more pronounced than Orest had previously anticipated (he currently forecast year-end 2018 visible stocks of 373kt or 61 days and it's only June). A recent discussion with commodity consultants WoodMackenzie suggest that a large portion of these draw-downs could be attributed to speculative hoarding."

 

 

 


 

#Lithium: “While we hesitate to claim ‘this time is different,’ we see several key reasons why this may actually be true for lithium” @GoldmanSachs @FT

Lithium sell-off is 'overdone' — Goldman Sachs | Financial Times
Investor concerns about a wave of supply of the electric car battery material from new mines are unfounded


Lithium sell-off is 'overdone' — Goldman Sachs

Developing new mines will be hard but demand will rise, analysts said

The sell-off in lithium equities this year is "overdone," according to Goldman Sachs.

Investor concerns about a wave of supply of the electric car battery material from new mines are unfounded, according to the investment bank, one of the biggest commodity traders.

Instead, it will be harder to develop new lithium mines that most people think, Goldman Sachs said. At the same time, demand for lithium is expected to rise fourfold by 2025, due to rising sales of electric cars.

"Coupled with ongoing rising demand expectations as auto OEMs look to electrify their fleets, we expect lithium markets to remain sufficiently tight to handsomely reward incumbent producers," Goldman Sachs said.

The bank recommended investors buy US producers Albemarle and FMC Corp, predicting their shares could rise by a further 34 per cent and 30 per cent respectively.

Shares in the world's largest producers of lithium, a white metallic powder which is used in all electric car batteries, have slumped this year, following double-digit gains in 2017.

Investors have grown increasingly concerned about a wave of new lithium projects that have sprouted up from Australia to Nevada to take advantage of rising prices.

Prices of lithium carbonate, a key lithium ion battery raw material, have increased nearly 40 per cent in the past 12 months on the back of increasing electric car production, according to Benchmark Minerals Intelligence.

But lithium is not like other commodities, according to Goldman Sachs.

The current market is small, with only around 200,000 tonnes of production a year, and has to grow rapidly to meet demand. The only other time commodity production has had to grow so fast was in the early 1900s, when oil and natural gas production almost quadrupled in ten years, Goldman Sachs said.

"While we hesitate to claim 'this time is different,' we see several key reasons why this may actually be true for lithium," Goldman said.

https://www.ft.com/content/75e6760c-7ed1-11e8-8e67-1e1a0846c475?utm_campaign=digest


July 2, 2018

#Lithium's Top Challenge Is Finding Funds

Lithium's Top Challenge Is Finding Funds, Not the Battery Metal - Bloomberg

Despite bullish forecasts - especially with accelerating production of #EV's electric vehicles -- lithium may have a funding problem. 

Banks are wary, citing everything from the industry's poor track record on delivering earlier projects to a lack of insight into a small, opaque market. 

Without more investment, supplies of the commodity could remain tight, sustaining a boom that already has seen prices triple since 2015.

Lithium companies will need to invest about $12 billion to increase output fivefold by 2025 and keep pace with the world's growing appetite for batteries, according to Galaxy Resources Ltd., an Australian producer seeking to build further operations in Argentina and Canada. 

Developers say that, so far, projects aren't getting financed fast enough to achieve that leap.

Lithium's Top Challenge Is Finding Funds, Not the Battery Metal

Altura Mining's lithium operation on May 2018. Source: Altura Mining."


Battery producers and automakers "have absolutely no clue on how long it takes to be able to put a mining project into operation," said Guy Bourassa, chief executive officer of Nemaska Lithium Inc., which spent about 18 months piecing together a complex C$1.1 billion ($830 million) funding program for a mine and processing plant in Quebec. "There will be a big problem -- it's going to be an impediment" to raising supply, he said.

...

While the amount of debt raised by miners, including loans and bonds, rose in 2017 to about $255 billion, project-specific financing of about $13 billion last year is more than 70 percent lower than in 2014, according to data compiled by Bloomberg. So far this year, about $6.1 billion in total has been issued for projects.


There's also concern about pricing. ..exacerbated by the opaque nature of the market, the inability to hedge and forecast oversupply in the medium term, and the small scale of some of the local players," the bank said in a statement.

It typically takes two years to build a lithium operation and five years to repay the project loan, according to Simon Price, a partner and co-founder at Perth-based Azure Capital Ltd., which has advised miners on financing. That means lenders need confidence in a seven-year outlook for the market, he said.

That price outlook is an industry flash-point. Morgan Stanley says there will be a surplus as soon as next year because of rising output and forecasts lithium carbonate prices to halve through 2021, according to a note. Citigroup Inc. also expects prices to decline as production increases.

Click here for a Bloomberg Opinion article on the state of the lithium sector

But boosting supplies may not be easy. By 2020, it's possible that only a third of planned new capacity will be available at the processing plants needed to convert mined raw materials into battery chemicals, Orocobre says. 

Lithium demand is also being underestimated, according to Pilbara Minerals Ltd., a producer starting a mine in Australia.

Pilbara Minerals Ltd.'s Pilgangoora mine site, Western Australia in June 2018.

Photographer: Reid Smith/Pilbara Minerals Ltd.

Some alternative funding sources for lithium have emerged, including hedge funds offering higher-yield debt or credit funds formed to lend to projects. They're more expensive, but "you build your project and you are in business now when the market is very strong," Price said. The sector's biggest players are readying an IPO blitz, in part to fund expansions.

Lithium users also are stepping in with funding. Posco, the South Korean steelmaker that's ramping up its battery-making business, and Great Wall Motor Co., China's top SUV producer, have both invested in Pilbara Minerals to speed up project development. Tesla Inc. in May signed a supply deal with Kidman Resources Ltd., a boon for the Australian developer as it seeks to finance a mine and plant.

Supply deals and investments with end customers mean lithium projects are being financed differently from traditional commodities, according to Westpac Institutional Bank, a unit of Australia's second-biggest lender.

Some banks are lending. Perth-based Galaxy last year secured a $40 million general purpose debt facility with BNP Paribas SA. 

...

Volkswagen AG alone plans to spend about 50 billion euros ($58 billion) on batteries as it seeks to build electric versions of 300 models. "Imagine how many tons of lithium salts it takes to make those batteries," Bourassa said.

See the whole article here: https://www.bloomberg.com/news/articles/2018-07-02/lithium-s-top-challenge-is-finding-funds-not-the-battery-metal