Tesla Model 3 Ignites Lithium Race

1 year ago by Mark Kane 28

The Tesla Model 3 Arrives - With "At Least" 215 Miles Of EPA Range

The Tesla Model 3 Arrives – With “At Least” 215 Miles Of EPA Range

Tesla Gigafactory

Tesla Gigafactory

Tesla Motors’s Gigafactory battery production facility in Nevada, which is designed to primarily produce lithium-ion cells for upcoming Tesla Model 3, but is as of today at an early stage (we believe) with battery pack assembly for energy storage.

Future cell production in high volume will also require volume lithium supplies, and Tesla signed two potential suppliers in 2015 – Rare Earth Minerals and Bacanora Minerals.

According to a Financial Post article, the topic of lithium suppliers for the Gigafactory isn’t closed, and raises some concerns:

“Tesla has further fuelled the investing frenzy around lithium by signing non-binding off-take agreements with two of the earlier-stage contenders; Pure Energy Minerals Limited (CVE:PE) on Sept. 16, 2015, and Bacanora Minerals Ltd. (CVE:BCN) on Aug. 27, 2015. In both cases, Tesla has agreed to purchase minimum tonnages conditional upon the companies being able to meet grade, tonnage, and most importantly, prices required by Tesla.

Neither company, however, has conducted a feasibility study, nor has either ever produced any lithium products. The agreements are therefore difficult to take seriously, and industry insiders speculate that they may be a strategic ploy to force the incumbent global producers of lithium to come down in price.

Well, anything is possible, and if that ignites a competition among the largest mining companies – Albemarle Corporation, SQM (Sociedad Quimica y Minera de Chile (ADR)) and FMC Corp., so be it.   According to the article, the 3 companies supply 90% of the world’s lithium today.

The main thesies of the article is that it will be difficult for new players to deliver quality products at lower prices than the industry giants. In other words, Tesla could be hit by inadequate supply or higher than anticipated prices.

“But that hasn’t stopped a dozen other would-be lithium producers from launching companies designed to capture and capitalize on the investing public’s naiveté when it comes to understanding the global lithium supply. Will they get into production in time to participate in a lithium bull market?

That is the question that need concern investors.”

Luke Kissam, CEO of Albemarl said:

“I have a hard time seeing anybody coming into the market, in any meaningful way, with a quality product, at a cost position similar to the majors at any time in the near future.”

source: Financial Post

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28 responses to "Tesla Model 3 Ignites Lithium Race"

  1. mhpr262 says:

    I wonder if Lithium extraction from the sea might not be a viable alternative. It is nowhere cost competitive yet (about 5x the cost of mined/salt brine Lithium IIRC), but as there are only about 22kg in a Model S battery and Lithium is still only a couple of dollars per kilogram I wonder if owners might not be willing to pay more for “organically ocean-harvested, non-destructive, non-mined, domestic US California Coast Bald Eagle Lithium”. If they are willing to spend $4,500 on a nice set of rims, why not $400 extra on ocean Lithium? Maybe offer s pecial badge on the trunk to go with it, too. Massive green creds.

    1. scott franco (the evil EV owning republican) says:

      I remember when gold extraction from the sea was a rage. Turns out that is where most of it is.

    2. Speculawyer says:

      Lol. Bald eagle pushed it over the edge.

      1. TomArt says:

        LOL

    3. MrEnergyCzar says:

      What percent of the total battery cost today is the cost of lithium? 50%? 5%?

  2. Mont says:

    I wonder if there’s a way to process the brine from the new Carlsbad desalination plant. Since it’s already partially concentrated –would be an interesting alternative.

    1. KumarP says:

      I love this and the green badge comment above it

    2. sven says:

      I’m sure if a bunch of engineers got together they could brinestorm a way to do it.

    3. ModernMarvelFan says:

      “I wonder if there’s a way to process the brine from the new Carlsbad desalination plant. Since it’s already partially concentrated –would be an interesting alternative.”

      +1000!

      I like how you think.

      When you do that, there are lots of minerals from those plants can be reprocessed.

      Co-production is often the most efficient way for any thing.

      Efficiency improvement is always a good thing.

      1. Phr3d says:

        well said

  3. Wd says:

    Bald eagle lithium? Haha. Americans…

    Chances are your average consumer doesn’t care where the lithium came from. That’s an anal detail

    1. Scramjett says:

      Given the American love affair with plastic bags and their sincere lack of concern with its impact on wildlife, you’re not wrong.

    2. scott franco (the evil EV owning republican) says:

      Sorry, I don’t think you can get lithium from your anus.

  4. Eco says:

    Elon mentioned an ‘unlimited’ supply of Lithium from the ocean in one of his presentations about a month ago.

    1. Scramjett says:

      Interesting. So he is at least thinking about it. I wouldn’t be surprised if he takes a deeper dive (pardon the pun) in Ocean lithium at some point in the future. The dude is, after all, primarily concerned with environmental impact and is more interested in how to reduce it than on the economics of it, or recognizes the need to play the economical “long game” in that you save money in the long run by lowering your environmental impact.

      Ok, that was a bit more long winded than I intended. 🙂

  5. DonC says:

    The idea of scale being able to appreciably cut costs has always been suspect because of the very high BOM/COG ratio (essentially raw commodities make up most of the cost, leaving little room for cost cutting). Raising costs for lithium would certainly be a negative, but lithium is hardly the largest component — well less than a hundred grams per kWh — and the price of many other commodities are likely dropping because of weak global demand.

    In any event I’d think Panasonic would be taking the lead on this. It surely has vastly more experience than Tesla in this area.

    1. ItsNotAboutTheMoney says:

      In batteries, the main costs are _not_ in the raw materials.

      But for battery costs to go where Tesla wants them to go (sub $100/kWh), _all_ costs have to be squeezed out, including energy costs, which is why they want a large factory, in a hot place with excellent renewable energy resources.

    2. Speculawyer says:

      But Panasonic lacks balls. Tesla is doing the right thing by gaming the lithium market to try to get more investment and competition in the lithium supplier market.

      I’m more worried about cobalt and other elements though.

  6. John says:

    “I have a hard time seeing anybody coming into the market, in any meaningful way, with a quality product, at a cost position similar to the majors at any time in the near future.”

    The EXACT same thing was said about Tesla in the not so distant past…

    Anything is possible.

    1. TomArt says:

      I had the exact same thought!

    2. theflew says:

      It’s possible, but Tesla has a short runway. If the Gigafactory and cell production is necessary to get the Model 3 to the $35k price point it means someone needs to come up with some Lithium in a pretty short order at the price target and in quantity.

  7. Fred P says:

    He will go with the companies that can provide the correct product with sufficient inventory. That would be the present 3. Sufficient inventory of the correct product is more important for production purposes. Cost will be an issue later when there is time for development of other sources.

  8. HVACman says:

    Another example of excitement over too-common “non-binding” Tesla-based agreements. Lithium supplier agreements, Model 3 reservations. “Non-binding” has a meaning – the same meaning as a “commitment” ring.

    Think about it before a making an actual “binding” Tesla-based agreement, like buying Tesla stock.

  9. MDED says:

    Chile has enough lithium to supply Tesla for years to come.

    1. Speculawyer says:

      Bolivia also has great resources. They just need some investment.

    2. theflew says:

      It’s not only about supply it’s also about the right cost and quality.

  10. Nix says:

    Lithium will easily solve itself. The only reason why there are so few lithium providers is that there hasn’t been demand to open new suppliers. It isn’t that these few providers are the only place to go and get the stuff.

    As demand rises, new sources will come online, like this site in Wyoming:

    http://oilprice.com/Energy/Energy-General/New-Wyoming-Lithium-Deposit-could-Meet-all-U.S.-Demand.html

    Meanwhile, battery makers keep finding ways to reduced the amount of Lithium needed in their batteries. And there is still a growing lithium battery recycling system that will recycle lithium back into the manufacturing cycle. No to mention any one of dozens of new battery chemistries that are being researched that involve no lithium at all.

    Most of the lithium fear mongering that the general public is exposed to is either marketing BS for lithium related business investments, or anti-EV FUD. Either way, lithium is not going to be as much an issue as many fear-mongers want you to think it will be.

  11. Just_Chris says:

    There is plenty of lithium just like there is plenty of oil and diamonds the problem with these markets is very few major players. In that situation there is a risk that a few will try and manipulate the market to artificially inflate prices.

    The advantage lithium has over other commodities is that there are large reserves of it in Australia, who will quite happy flood the market with no thought to what it might do to the price of a commodity.

    Most Australians can’t think far enough a head to merge safely onto a freeway the idea that they could come together with another nation to manipulate the market is so far from reality it is not true, to give you a bit of insight Tasmania, a fairly large Australian state, is currently struggling to produce enough electricity despite having enough hydro and wind resources to be many times over self sufficient. The situation is so bad they are shutting down major industries and importing diesel generators from the mainland.

    IMO as long as their is lithium in Australia any price spike will last as long as it takes to build another mine.