Tesla\'s Evolving Cobalt Nightmare

by:CTECHi     2020-03-31
Over the past 10 years, we have been awash with a lot of news stories and investment analysis, praising the advantages of electric vehicles powered by high energy lithium. ion batteries.
These stories prove the environmental benefits in theory and speculate on how electric vehicles can change the world\'s energy landscape forever.
While occasional realists question whether there is enough lithium to meet the needs of the soaring battery industry, everyone ignores or ignores more critical mineral restrictions --cobalt.
This is a huge challenge.
A giant worthy of the name!
This chart from BatteryUniversity summarizes the typical energy ratios of nine different battery chemicals. Six lithium-
Ion Chemistry (orange column) uses different amounts of lithium metal in its cathode and electrolyte formulation.
Although there is no single \"correct\" value, lithium-
Ion batteries with perfect electro-chemical efficiency require 80 grams of lithium per kWh.
As there is no perfection in the real world, the industry average is close to 160g/kWh.
According to iverken energy, lithium
In 2014, 118,000 tons of active cathode material batteries were used in the ion battery industry, with an average output of 2 tons. 4 kg/kWh.
According to BatteryUniversity, LCO, NMC and NCA, lithium-
Ion chemistry with the highest energy density, all of which use cobalt in the cathode.
For LCO, cobalt represents 60% of the mass of the cathode, about 1. 44 kg/kWh.
For NMC, cobalt accounts for about 15% of the cathode mass, about 0. 36 kg/kWh.
For NCA, cobalt accounts for 9% of the cathode mass, about 0. 22 kg/kWh.
Avicenne expects global battery production to reach about 135 GWh per year by 2025.
Predictions from Tesla (NASDAQ: TSLA), LG chemistry (OTC: LGCEY), Foxconn, BYD (OTCPK: BYDDY) avicenne may be conservative, boston Electric is building new battery plants that will increase manufacturing capacity to more than 150 GWh by 2020.
However, as far as this article is concerned, I think conservative is the best.
Supply and demand for lithium and cobalt.
My first form summarizes (1) the current annual production of lithium and cobalt worldwide (metric tons), and (2) The estimated tonnage of each metal in the finished battery sold in 2015 by the battery industry, and (3) The estimated tonnage of each metal reflected in the finished battery sold by the battery industry in 2020, if the battery demand increases at a moderate rate predicted by Avicenne, it is 2025.
According to the US Geological Survey, in 2015, the battery industry accounted for 35% of the global lithium demand, and about 11,375 tons of refined metal for finished metal content were purchased at 9,760 tons.
According to the cobalt Development Institute (CDI), in 2015, the battery industry accounted for 41% of the global demand for cobalt, and about 40,600 tons of refined metals with finished metal content were purchased for about 35,200 tons.
While 15% of raw material waste and shrinkage may reach the same high level, they are actually very reasonable when considering the complexity of converting refined metal raw materials into finished battery products.
When I see these figures, I believe that if the battery industry wants to avoid the insurmountable supply chain challenges, the global production of lithium and cobalt must grow rapidly in the coming years.
Unfortunately, lithium and cobalt
Products or minors
The products of other minerals and the increase in demand for lithium and cobalt may be insufficient to bring business opportunities to mining companies.
Production Dynamics of lithium.
Lithium is a strange \"secondary metal\" that currently produces only 32,500 tons of metal per year, or about 172,500 tons of lithium carbonate.
According to the US Geological Survey, 35% of lithium was used in the battery;
Ceramic and glass, 32%;
Lubricating oil, 9%;
5% of each air treatment and continuous casting slag powder;
Production of polymer, 4%;
Output of raw aluminum, 1%;
And other uses, 9%.
According to data from SQM (NYSE: SQM), the world\'s largest producer of lithium: Quarter 2
16 Financial Report, SQM disclosure: SQM also provides the following information, disclosing consolidated revenue by six product categories
For the period ended June 30, 2015 and 2016. (Note 26.
3) lithium production is clearly the most profitable part of SQM, but without the potassium, plant nutrients and other minerals produced by SQM from Salar, operations at Salar de Atacama
This means that any decision to increase lithium production will depend on the stability and sustainability of the global market.
Because SQM cannot produce more lithium without producing more lithiumproducts.
If supply forces are increased
The price of the product is down and the game may not be worth the candle.
I don\'t know enough about the operation of SQM to understand the interaction between lithium and its other products, but I do find it interesting that revenue was flat from 2015 to 2016, although lithium revenue doubled and lithium Gross profit increased by 10%, the total gross profit decreased by about 135%.
If SQM had to work with co-
In any decision to expand the production of Salar de Atacama lithium, the issue of product market strength, I must believe that other companies that produce the vast majority of lithium in the world from the British will face similar
At present, 35% of the global lithium production comes from the battery industry.
In the next 10 years, this ratio will increase to around 78% unless more resources are invested.
Given the usefulness of lithium in other industries, it is difficult for me to accept the suggestion that the battery industry can lock in 78% of the available supply and do so at an attractive price.
In my opinion, lithium production dynamics provide a meaningful window of opportunity for primary miners who can quickly launch new lithium projects.
But investors considering lithium space must understand that (a) lithium is not and will never be \"new gasoline\" and (B) the time spent on mining projects is always longer than anyone expected, the cost is also higher than anyone else, and (c) extremely cautious and prudent analysis of suspicion is essential.
Production Dynamics of cobalt.
According to the Institute for the development of cobalt, 94% of the world\'s cobalt supply comes from nickel and copper mines that produce cobalt as a by-productproduct.
This means that only 6% of the global supply of cobalt comes from mines, which may increase production as demand in the battery industry grows.
Nickel miners in the world sell $14 a year.
58 billion nickel and $1.
5 billion of cobalt, which means 6 of cobalt income.
7% of their total income.
It\'s worse for copper miners to sell $68.
Copper 4 billion, $0.
92 billion of cobalt, which means that cobalt income accounts for 1.
3% of their total income.
Looking forward to the supply side of the cobalt market to meet the needs of the battery industry, just like looking forward to a cropped tail shaking a rotweiner dog.
While global refined cobalt production soared from 52,400 tons in 2005 to 99,000 tons in 2015, most of the increase was due to new capacity at copper mines in Africa.
In addition to the difficult regulatory problems faced by companies that buy metal from African miners, metal production in African mines is not necessarily reliable.
In 2015, Glencore (OTCPK: GLCNF) produced 421,900 tons of copper and 19,400 tons of cobalt from the Katanga, mutaada and Mopani mines in Africa.
On last September, as part of a debt reduction and modernization plan, Glencore announced the closure of Katanga and Mopani for 18 months.
These closures will temporarily reduce the production capacity of cobalt by several thousand tons.
According to the cobalt Development Institute, the battery industry uses 41% of the world\'s cobalt supply.
In the next 10 years, this proportion will increase to about 65% unless new cobalt resources are put into production.
Although there is limited competition in the global lithium market, cobalt is one of the most useful metals. Critical non-
The use of batteries includes: The bottom line is that the cobalt supply chain depends entirely on the global demand for nickel and copper.
To make matters worse, cobalt demand is very inflexible due to (1) the critical nature of alternative uses and (2) the low price sensitivity of competing users.
While new primary cobalt mines may go live, exploration, licensing and development of new metal mines often take ten years of work and billions of dollars.
In my opinion, the battery industry is on the verge of a very unpleasant confrontation with the inevitable reality of the mining industry.
The supply of the cobalt equation depends entirely on the global demand for nickel and copper.
The demand side of the cobalt equation includes a variety of highly competitive manufacturers who need cobalt from products that the world considers essential.
At any time, fast-growing demand crosses with inflexible supply, resulting in a sharp rise in prices.
Since I wrote about cobalt supply restrictions for the first time in the third quarter of this year, with savvy investors starting to recognize the inevitable global shortage, spot cobalt prices have risen by nearly 40%.
In the next six months, things will become very interesting.
The battery industry itself does have the ability to release additional cobalt supplies by phasing out LCO chemistry, which requires 1.
Cobalt at 44 kg/kWh and reconfigure the LCO plant to manufacture NMC or NCA chemical products that require 0. 36 and 0.
Cobalt is 22 kg/kWh, respectively.
I would love to be a fly on the wall of a battery manufacturer telling another conference, \"I hope you stop producing LCO batteries so I can re-tune your supply chain for my business.
\"BYD and LG Chem are currently producing LCO batteries and they may be able to readjust the use of the supply chain to accommodate higher production of low batteries
Cobalt battery.
Unless new market entrants like Tesla, Foxconn and Boston Electric are quietly reconfiguring their factories to reduce costs
Energy LTO, LFP and LMO batteries, I don\'t think it would be possible for any of them to establish a secure cobalt supply chain in the foreseeable future. Conclusion. In the lithium-
In the ion battery industry, material costs account for 50-70% of total manufacturing costs, one of the highest in the world.
The popular green myth that lithium
Due to gigabit batteries and other vaguely defined \"economies of scale\", the price of ion batteries will drop sharply as productivity is expected to soar.
\"Given the current production dynamics of lithium and cobalt, an increase in demand can only lead to an increase in the price of raw materials.
Since the most competitive lithium and cobalt users are far less sensitive to the price of raw materials than the battery manufacturers, they will protect their supply chain, and the battery industry will either pay or not, it\'s a safe bet.
Without the design capability of 35 GWh per year or a gigabit factory close to its design capability, Tesla would not be able to launch the $35,000 Model 3.
This will require approximately 7,800 tons of cobalt per year.
Everything I \'ve seen shows that Tesla doesn\'t have a cobalt supply chain that can take nearly 10% of the world\'s cobalt production from companies that currently use this metal.
The bottom line for investors is, \"it doesn\'t matter how big your Gigabit factory is if you don\'t have rocks --
Provide a solid supply chain for your basic raw materials.
\"Disclosure: I/we do not have a position in any of the stocks mentioned and do not plan to start any position in the next 72 hours.
This article was written by myself and expressed my views.
I have not received compensation (except for Seeking Alpha ).
I have no business relationship with any stock company mentioned in this article.
Editor\'s note: This article discusses one or more securities that are not traded on major US securitiesS. exchange.
Please note the risks associated with these stocks.
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