Lithium Valley Main Report 2018
To reinforce their lithium manufacturing credentials, Chile undertook a global roadshow targeting major battery component manufacturers, essentially offering security of supply, favourable production environment and discounted lithium chemical prices. The effect of this policy so far has resulted in commitments that should see the commencement of production in Chile of about 58ktpa of battery cathode material within two years by two South Korean and two Chinese companies with an investment cost of approximately US$758 million (A$985 million). 11 Currently, the key players that dominate supply of lithium carbonate equivalent (LCE) are: North Carolina-based Albemarle Corp. as the market leader, with an 18% share of the total market, followed by Jiangxi Ganfeng Lithium Co 17%; Soc. Quimica & Minera de Chile SA (SQM) 14%; and Tianqi 12%. Other minor players produce the residual volume, the largest among them being FMC Corp. (5%), which is soon to offer its shares in a planned initial public offering. 12 Several of these companies have substantial off-take agreements with China. The EU Commission has established an EU Battery Alliance with the intended purpose of avoiding reliance on Asia for supply of batteries. The working group has set out to identify existing European expertise in all segments of the battery supply chain. Australia has an opportunity to develop its own policy approaches to deliver similar outcomes as well as being a reliable, diversified and responsive source of supply to the global customers such as the EU.
In the past three years China has been leading the way in investment for battery megafactories with 49% of production capacity, followed by the EU with 23% of planned capacity and 15% in the USA. It is worth noting that both Europe and the USA are dependent on securing resource supplies in order to support their own value-add industries. China controls 89% of the lithium refining and processing market, 75% of the electrochemical market and 50% of the cell production market by value. This is a significant concentration of critical processes in one country for this strategic material especially when Chinese companies also are vertically integrated with miners, battery producers, assembling and distributing. 13 As this industry progresses, there is a growing trend for companies to develop and implement ‘responsible sourcing’ policies in line with the Organization for Economic Co-operation and Development (OECD) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. As an example, Tesla reports to the US Securities and Exchange Commission on their sourcing of ‘conflict materials’ for products used in their vehicles. 14 Australia can benefit from resolving these challenges through rebalancing the current concentration of control over traceable supply chains in this sector, without compromising the economic development of its trading partners.
11 Reuters (2018), “Chile says companies to invest $754 million in lithium industry”, Reuters, https://www.reuters.com/ article/us-chile-lithium/chile-says-companies-to-invest-754-million-in-lithium-industry-idUSKCN1GL2UA . (Accessed: 01 May 2018) 12 Fickling, David (2018), "The Lithium Cartel Should Be Stopped", Bloomberg, 18 May 2018, https://www- bloomberg-com.cdn.ampproject.org/c/s/www.bloomberg.com/amp/view/articles/2018-05-18/time-to-block-the-lithi- um-cartel . (Accessed: 01 May 2018) 13 Association of Mining and Exploration Companies (2018), A Lithium Industry in Australia: A value chain analysis for downstreaming Australia’s lithium resources. https://amec.org.au/Public/Media/AMEC_Publications/A_lithium_Industry_ in_Australia.aspx . (Accessed: 01 May 2018) 14 Lambert, Fred (2018), "Tesla releases 'Conflict Minerals Report', increases minerals tracking and reduces cobalt use", Electrek, 30 May 2018, https://electrek.co/2018/05/30/tesla-conflict-minerals-report-battery-cobalt/ . (Accessed: 30 May 2018)
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