The impact of automotive electrification on lithium: 1TWh and 1Mt LCE in 10 years?

Transcription

1 The impact of automotive electrification on lithium: 1TWh and 1Mt LCE in 10 years? Robert Baylis Roskill 9 th Lithium Supply & Markets Conference Montreal 31 st May 2017

2 A moment to reflect: Where have we come in 12 months

3 What happens in Vegas Promise is being replaced by reality, so yes, 2016 appears to represent the point from which things will change for EV success But, this isn t a hockey-stick or exponential growth moment, rather EVs finally starting have the more pronounced impact long predicted Tesla does matter, because it is disruptive. Just like the ipod was to music and the iphone to mobile communication However, the automotive industry cannot change overnight, it is going to take time, and that is partly a supply chain issue, even for Tesla Yet even with a small change, the existing lithium industry has already started to run into problems; can it meet the challenge? Are higher prices a good thing? Yes, because it provides the incentive that has yet to emerge from downstream users, but beware the future - booms have a habit of going bust

4 What has happened since? ± Review of xev sales suggests 2015 was the year when the EV momentum started, albeit China e-bus driven, 2016 a meh year + Tesla opened its Gigafactory, remains on course for Model 3 deliveries from mid China announced new mandates for electric vehicle sales (after an uncertain start to 2017) + Germany and India also announced new aggressive mandates for electric vehicle sales + Automakers lay out their strategies to meet these targets and after dieselgate - Trump announces plans to review EPA CAFE standards to boost automaker profits + Lithium supply jumps, producers announce capacity expansion plans for feedstock, carbonate and hydroxide as demand outlook and higher prices incentivize capital investment - The lithium boom has boosted the exploration sector but limited advances in development projects needed to meet future demand growth

5 Reaching 1TWh: Theoretical market potential of electric vehicles

6 Growth in vehicle sales is driven by population growth, as well as increasing motorisation rates Motorisation rate (vehicles per 1,000 persons) In China, the largest single market, current motorisation rates are estimated at around 128 vehicles per 1,000 persons In Europe and North America, the current figure stands at an estimated vehicles per 1,000 persons China Japan Europe Americas India Rising incomes mean vehicle sales in China are on the rise, India could follow from the mid-2020s In the 2000s, China entered its most commodity-intensive period. In the 2010/20s, it will experience the fastest growth in vehicle sales Source: Roskill

7 Driven by strong growth in Asia, the automotive market is forecast to grow from 94M vehicles in 2016 to 157M in Baseline vehicle sales (million) The rate of growth is likely to remain subdued in 2017 and 2018, but is forecast to gradually increase Commercial vehicles (including buses, coaches, trucks and light commercial vehicles such as pickups) account for 22-26% of sales Owing to the larger size of commercial vehicles and pollution controls, they also play an important part in the outlook for electric vehicles Passenger cars Commercial Source: Roskill

8 On-demand (incl. autonomous vehicles) could eat into overall sales as intensity of vehicle use increases 140 Impact of shared services and autonomous cars on passenger vehicle sales Secure At risk (high-impact) Assumed demand destruction (baseline) On-demand services are reducing the incentive to drive, for example in the UK the number of people passing their driving test has fallen to historic lows = generation Uber Shared services result in greater vehicle up-time, but fewer sales as utilisation rises Source: Roskill

9 For battery raw material demand, electrification rates are a more important factor than growth in overall vehicle sales Electrification is no longer mere fantasy, as regulators and manufacturers alike appear to have embraced EVs In Germany, regulators have mandated all electric vehicle sales to be fully-electric by 2030 (potentially some 3.4M passenger EVs in Germany alone, compared to some ~ k sales globally in 2016) Similar legislation is under discussion in the Netherlands and Norway, and is likely to become an EU issue at some point. China has adopted legislation requiring 8% of vehicle sales to be electric, increasing to 12% by 2020 modelled after Californian legislation based on 2016 sales volume equivalent to 2.2M vehicles Volkswagen has stated that it aims, by 2025, to sell two-three million electric vehicles per year, as a response to dieselgate

10 External factors incentivizing EV growth are being helped by economics, cost parity to ICE due to be reached in 5 years Headwinds End of, or reduction in, incentive schemes; vehicle prices Low oil prices Supply chain constraints Raw material availability Charging infrastructure Range Availability Lower car ownership Look/feel of ICE models Tailwinds Cost reduction in battery and EV drive components Carbon dioxide and particulate matter mandates; city/national targets Simpler design and build; large-scale battery facilities Improved efficiency and recovery; investment in upstream Network expansion, improved range Improving cell performance Greater number of models Shared services (incl. autonomous driving) more suited to EV Younger drivers more used to high-tech

11 The baseline outlook for electrification suggests we are on the edge of a radical shift in the automotive industry 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Baseline assumptions for world electrification (% vehicle sales) HEV PHEV EV standard EV performance 48V At present, electrification rates are about 1.3% in commercial vehicles and 5.2% in passenger vehicles Thus far, much of this has been accounted for by hybrid vehicles (HEVs) like the Toyota Prius Roskill s baseline assumptions for electrification are relatively conservative and assume the following: 9% BEV by % PHEV 10% HEV (incl. NiMH) 7% 48V mild hybrids Source: Roskill

12 Sales potential for electric vehicles remains on the upside Worst-case scenario: Reduction in vehicle sales owing to a stronger-than-expected impact of on-demand driving models on overall vehicle sales Best case scenario: Further and more aggressive mandates for electrification targets, increased customer enthusiasm 4,000 3,500 3,000 2,500 2,000 1,500 1, Scenarios for electric vehicle sales (GWh) Worst Base Best Source: Roskill

13 The demand picture is complicated by the evolving nature of lithium-ion and post lithium-ion batteries Roskill s automotive model takes into account the following additional factors: Changes in motorisation rates as a result on-demand vehicles Increases in the driving range and vehicle energy capacity Regulatory requirements on the rollout of electric vehicles Performance improvements in batteries, meaning less material is required Risks of substitution owing to concerns over cobalt supply Risks of a new economic downturn over the outlook period Possibility of a more significant slowdown in the Chinese market And more

14 Reaching 1Mt LCE: The outlook for lithium

15 10GWh to 100GWh in 10 years 100GWh to 1TWh in another 10/15 years? The battery market grew rapidly over the last decade, boosted by smartphone, tablet and more recently xev demand The future should not surprise us, 1TWh is only 10 million Tesla Model S The past The future Li-ion battery demand (GWh) Li-ion battery demand (GWh) Portable Power & Motive ESS Automotive Low-case High-case 2026 Source: Roskill

16 Automotive batteries have a widely varying impact on the size of various metal markets, with lithium being of a different order Lithium uses in automotive applications are expected to increase to 530% the current total market size for lithium by 2030 Increases are also significant for cobalt (167%), sparking concerns over availability of supply and risk of substitution Automotive batteries use of graphite and nickel are expected to increase to 63% and 30%, respectively, of the current market size Source: Roskill

17 Other scenarios influencing demand for lithium include faster electrification, effect of economic crisis, a Chinese slowdown, etc. 140% 120% 100% 80% 60% 40% 20% 0% -20% -40% -60% Impact of scenarios on baseline lithium demand in xevs Investments in commercial charging infrastructure LFP looses market share in commercial and Chinese passenger vehicles Performance gains at double pace (less material required) EU and Japan to adopt similar legislation to Germany from 2035 Cobalt supply constraints (increase in Ni intensity) Slowdown of Chinese economy and ROW effects Faster electrification in China Effect of autonomous and on-demand vehicles (10% drop in passenger motorisation rate by 2030) Roskill has thus far explored 8 different scenarios to assess their impact on raw material demand In some cases, the effects of these scenarios are cumulative On the basis of these scenarios, Roskill expects most risks to its baseline outlook to be on the upside

18 China and Tesla actions are the short-term focus, impact will then spread to other areas towards/in 2020s, with growth accelerating 1,800,000 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 - Forecast demand for lithium by use to 2026 (t LCE) Uncertainty around xev penetration rates 1Mt LCE Rechargeable battery Other Low High Forecast demand growth revised upwards to 9.0%py high-case scenario in late 2016 from 6.4%py base-case in multi-client report, new 2017 projections suggest 17.7%py through 2026 Reason: Larger than expected rise in EV sales during 2015 and 2016, as well as more robust government and automaker plans for near/long-term. Rechargeable batteries to account for 50% of total lithium demand in 2018, and 85% in 2025 Source: Roskill

19 The composition of cathode materials is changing, owing to increased performance requirements and regulation 100% 90% Roskill s baseline forecast for changes in cathode chemistry (passenger vehicles, %) Nickel-manganese-cobalt (NMC) and nickel-cobalt-alumina (NCA) is emerging as the materials of choice of many car manufacturers 80% 70% 60% 50% 40% 30% 20% 10% 0% NiMH LFP NMC (low Ni) NMC (mid Ni) NMC (high Ni) NMC-LMO NCA LFP is in widespread use in commercial vehicles and some passenger xevs, especially in China where a ban on other materials has now been lifted Higher energy density cathode materials with mid/high nickel content are at the forefront of extended range xevs, and will require increasing amount of lithium hydroxide Source: Roskill

20 The capital investment to reach 1Mt LCE in 2026 is significant, but is not silly 1,200 Lithium capacity and investment required 14 Reaching 1Mt LCE demand in 2026 will require >1Mt LCE in mined and refined capacity Required refined capacity (000t LCE) 1, Investment (US$Bn) Assuming US$12,500/t LCE CAPEX, almost US$12Bn will need to be spent to build it This seems ludicrous, think of the parallels: Gigafactory (35GWh) = US$5Bn Lateritic nickel mine/refinery (50kt Ni, 5kt Co) = US$3-5Bn Current Required Cost (US$Bn) Source: Roskill

21 The latest lithium boom has been focussed on exploration, not enough projects are maturing to fulfil demand into the 2020s Source: Albemarle

22 Conclusion

23 Automotive batteries are starting to become the major application for lithium. Is it time for end users to get involved with lithium supply? Automotive batteries represent a huge potential market for lithium. In Roskill s baseline forecast, demand will likely increase to over 1Mt LCE in the mid-2020s, but the theoretical market potential is considerably larger than that long-term. Short-term (to 2021), demand growth will be met by existing, expanded and some new capacity Mid-term (to 2026), more investment is required to boost capacity; the CAPEX to achieve 1Mt LCE looks high versus the value of the lithium market today, but not in comparison to CAPEX downstream or other raw materials Long-term (to and beyond 2031), much more extensive resource development is required, new technologies may be needed If left to capital markets, investment will be too slow, therefore users may be required to step-in and assist with development costs

24 Roskill Research & Consulting Consulting: Market assessments Feasibility studies Industry analyses Acquisition studies Strategic planning Competitive evaluation studies Commercial intelligence Due diligence Contact: Robert Baylis Research coverage: Steel alloys: Nickel, chrome & moly Iron ore, silicon & manganese Vanadium & niobium Minor metals: Tin, tungsten & tantalum Rhenium, gallium & indium Antimony, cobalt & REEs Lithium, magnesium & titanium Industrial Minerals, e.g.: Bauxite, alumina & mag comps. Feldspar, zircon & soda ash Bentonite, barytes & frac sand GCC/PCC, kaolin, talc & vermiculite Carbon & chemicals, e.g.: Act. carbon, graphite & pet coke Salt, iodine & boron