Lithium News

Over the last few months, the oil price has been steadily on the rise sparking concerns of inflationary rates that could touch a three year high. Morgan Stanley has predicted the cost of a barrel to go as high as $90 by 2020, which would spike the fuel expenses in the freight industry. The alternative to combustion engine trucks is their electric equivalents, made popular by companies like Tesla and by a global push towards reducing carbon footprint in the environment.

Though EVs look to be the answer, there is more to it than that meets the eye. For one, conventional EVs use lithium-ion batteries. The manufacturing process of lithium-ion batteries produces a significantly higher carbon footprint compared to combustion engine production and also uses the rare-earth metal cobalt – which is being dug out in African mines, where child labor is rampant. But the most significant caveat of all for a conventional EV is the charging time and the need to have a charging station on the highways that the trucks ply. For long-haul trucks, working with a conventional EV would be borderline impractical.

A far more viable alternative to an EV with a lithium-ion fuel cell, would be an EV that runs on hydrogen fuel. The advantage? Hydrogen fuel cells have the liberty of running without the need for staying put in a charging station every time the battery runs out in a conventional lithium-ion battery EV. All it needs is a refill, which typically takes as much time as it does to fill the tank of a combustion engine truck.

“The by-product of a hydrogen fuel cell is electricity, heat and clean water. It is like having a phone charger on a cell phone that does not have to be plugged into the wall. You can drive around while it is charging,” said Larry Pitts, Director of Mechanical Design at Plug Power. The company primarily works on replacing lead-acid batteries in material handling situations such as forklifts and airport tuggers. The hydrogen fuel cell acts as a generator without a combustion engine, producing electricity without emissions.

Recently, Plug Power has partnered with FedEx and developed a hydrogen-powered delivery van in association with Workhorse Group, now deployed on a standard delivery route for the FedEx facility in New York. But the relationship with FedEx goes back a long way, back to the time when FedEx asked Plug Power to replace diesel run airport tuggers in their Memphis facility. It was the ties with FedEx that prompted the company to move from equipping indoor warehousing forklifts with hydrogen fuel cells to outdoor machinery like airport tuggers.

“FedEx has an enormous fleet of vehicles at that hub, and they ran outside on the tarmac of the airport. Part of our growth towards where we are, happened from us taking the warehouse application and putting it in airport tuggers. We have seen everything from desert conditions during the summer to winter and rain – all the conditions that you would see on roads in the North East,” said Pitts.

Coming off with the success of the airport tugger, FedEx fancied its chances of building a delivery van along with Plug Power. The stakes were much higher on a delivery van, noted Pitts. “These vehicles that FedEx has out on the road hold a lot of important packages, and if anything happens to the vehicle, FedEx is going to get a lot of grief from its customers. So we had to build a lot of confidence with them through the airport program before getting to work on this,” he said. The delivery van has now clocked over 4000 miles on the road, and the goal for Plug Power is to move to the next phase – manufacturing 20 trucks.

Looking back, the driver feedback from the van has been gratifying. Apart from the obvious benefits of a better pickup and a silent vehicle to drive around, the driver also threw in an interesting perspective – that he did not smell of diesel at the end of the day, and felt like he was “driving a golf cart.”

Hydrogen-fuel batteries are the future, as the element in itself is the most abundant one in the known universe. Plug Power’s ProGen fuel cell increases the range of the vehicle by 166% over battery power alone, allowing it to operate for 160 miles per delivery cycle before returning to be refueled.

“If we find a way to make hydrogen our fuel, it is not just Plug Power that wins, but humanity wins on that one. That is a very big deal,” said Pitts. “For a very reasonable cost that pays itself back quickly, we installed the fuelling station dispenser, so that liquid hydrogen can be delivered to the site. We make it easy for anyone to use this technology.”

Pitts explained that the idea was to increase productivity while reducing the carbon footprint of driving a truck. “By using our ProGen fuel cell, they would gain the all the time they usually spend in charging batteries. And also, it does not drop off like most electric motors – like a cordless drill or a fishing throwing motor – where they start to slow down after a while, and you need to charge them. Ours is constant charging, so there is constant power the entire time,” he said.

Plug Power has over 20,000 vehicles running its systems, right from forklifts in warehouses to tuggers in airports – and now FedEx delivery vans. Apart from FedEx, the company has high profile customers like Walmart, Amazon, Home Depot, BMW, and Mercedes, to name a few. “These companies are working with us not only because it is environmentally effective, but because they see an increase in productivity,” said Pitts. “The fact that there are no emissions is kind of like having your cake and eating it too.”

Porsche has announced the model name for the production version of its Mission e pure-electric concept vehicle: Taycan. The name references the horse at the center of the Porsche crest. Porsche did not release images of the production-intent vehicle, or expand much on previously published engineering information. Porsche executives spoke primarily to the level of investment in creating the component sets they will use to create a range of pure battery-electric vehicles.

We already know that Taycan will have the electric equivalent of 600 horsepower and should hit 60 mph in about 3.5 seconds. More important, Porsche promises that unlike other electric vehicles, which tend to be acceleration sleds and not fully rounded sporting vehicles, Taycan will have all the attributes one expects from a Porsche. Porsche also promises over 300 miles of range.

Sometime soon Porsche will grant access to the Taycan engineering team for in-depth discussions of vehicle engineering.

General Motors (NYSE:GM) and Honda Motor (NYSE:HMC) announced that they plan to team up on advanced batteries for electric vehicles in a bid to push back against Tesla (NASDAQ:TSLA) and its massive Gigafactory.

What’s the deal?

Simply put, Honda will buy electric-vehicle battery packs from GM to use in its own vehicles. The companies will each develop their own unique electric vehicles, but Honda’s will be designed to use GM’s upcoming next-generation batteries.

What are those “next-generation” GM batteries?

Here’s the background.

GM already has a long-range mass-market electric vehicle in production, the Chevrolet Bolt EV. The Bolt uses what GM calls its “first-generation” battery system, developed by GM with Korean supplier LG Chem. LG Chem produces the battery cells and packs for the Bolt, using a unique battery chemistry owned by GM.

But GM has a more advanced battery system under development, including new cells and new battery packs. GM expects the new cells to cost less than $100 per kilowatt-hour (kWh), down from the roughly $145 per kWh it pays for the cells used in the Bolt. The new battery cells have a higher energy density than GM’s current cells, they’re better for high-speed recharging, and they have a lower profile that gives GM much more flexibility around the shapes of its battery packs.

The new cells will allow GM to build smaller, thinner battery packs with more range. The new batteries will come to market as part of an all-new electric-vehicle architecture that GM will launch in 2021. Importantly, GM CEO Mary Barra has emphasized that the electric vehicles built on that architecture will be profitable.

Is Honda using GM’s electric-vehicle architecture?

No. Honda will design its own electric-vehicle architecture around GM’s new battery packs. Part of the agreement is that GM will share all of the relevant engineering information well in advance of the new batteries’ launch.

Why does Honda want to work with GM?

Honda and GM have already established a partnership around another electric-vehicle technology: hydrogen fuel cells. GM and Honda have been working for several years to jointly develop a new series of lower-cost fuel cells for automotive applications. Honda has already brought one of the jointly developed cells to market in its new Clarity FCV sedan, while GM has said that it will wait until the next-generation cell is ready before launching its own fuel-cell-powered products, likely around 2020.

Last year, Honda and GM set up a joint venture to (eventually) mass-produce the fuel cells in a factory in Michigan.

What does Honda get out of this deal versus just buying battery cells?

Honda could certainly strike a deal to buy battery cells from a company like LG Chem and use them in a pack of its own design. But by buying from GM, it gets a complete battery “module,” saving it the step of developing a pack. It also gets GM’s upcoming new battery cells, which may have range, packaging, or cost advantages versus the cells available to Honda from battery makers.

It’s very likely that GM gave Honda some inside information about the capabilities of its upcoming new batteries and that Honda decided that buying GM’s battery packs made more sense than alternatives.

Timing may also be a factor. Honda lagged other major global automakers in stepping up development of battery-electric vehicles. Its current battery-electric model, a version of the Clarity sedan, has just 80 miles of range. Honda may have decided that working with GM would help it get competitive vehicles to market more quickly.

What does GM get out of this?

Obviously, GM probably plans to make a profit on the battery packs it sells to Honda. That’s a good thing. But there may be a bigger consideration: The scale that Honda adds might help GM bring the costs of the new battery cells down further, benefiting both partners — and helping to offset the scale advantage that Tesla is expected to have once its battery Gigafactory in Nevada is fully up and running.

When is this all going to happen?

GM has said that it will launch its all-new battery-electric vehicle platform in 2021. That platform will underpin many of the 20 all-electric vehicles that GM has promised to launch by 2023. It’s very likely that Honda will be ready to launch its own advanced electric vehicles, using GM’s new battery packs, on roughly the same time frame.

The Nintendo Switch is a fantastic option for gaming on the go, but playing demanding console games while you’re out and about can seriously drain your battery life. Now, if you need some extra juice while you’re out, Anker has you covered with two new USB-C battery backs that have been specifically designed to quickly recharge Nintendo’s portable console.

Now, the Switch uses a standard USB-C port for charging, so pretty much any USB-C PD battery pack with a high enough power output will work in a pinch. But Anker’s new packs claim to be different: both power banks have been calibrated specifically for fast-charging the Nintendo Switch. Anker claims that players can fast-charge their consoles in less than three hours, even while still playing games.

There are two battery packs to choose from: the larger Anker PowerCore 21000 PD, which is an updated version of the Anker PowerCore 20000 PD, costs $89.99. Anker claims it can extend the Switch’s battery life by up to 15 extra hours (or roughly five full charges). There’s also the Anker PowerCore 13400 PD, which costs $69.99. Anker claims is the “smallest Power Delivery power bank” that can fast-charge the Nintendo Switch. The PowerCore 13400 PD should give players up to nine hours of extra charge (or roughly three full charges).

The two battery packs will be available for preorder later in June from GameStop and Anker’s website.

While the company said its focus remains on developing a fully integrated lithium carbonate project in Extremadura – western Spain – high level work undertaken by both it and processing engineering company Wave International had indicated it could spend an additional US$61 million and produce lithium hydroxide.

The latter currently enjoys both slightly better pricing and market fundamentals according to Infinity.

“The increasing market share of lithium hydroxide in the lithium chemical market with year-on-year growth rates outstripping that of lithium carbonate and projected to continue doing so into the future,” Infinity said.

“Lithium hydroxide is used in a range of applications including greases and breathing gas purification systems, however the burgeoning growth in demand for lithium hydroxide has been driven increasingly through its application in lithium batteries.”

San Jose is currently subject of a feasibility study, with scoping work last year estimating a pre-production capital cost for a lithium carbonate operation of $273 million.

Feasibility work is expected to be completed by the end of the year.

Infinity started the June quarter with A$5.3 million cash.

Shares in the company were trading this week at 8.9c, capitalising Infinity at about $17 million.

What was last year’s “next big thing” has been pushed out of the investor limelight by cobalt, another key metallic input to the electric vehicle (EV) revolution and one with an even more troubled supply profile.

Lithium prices have also been taking a breather after their meteoric rise over the 2015-2017 period.

The lithium supply chain is currently absorbing a wave of new production, much of it coming from hard-rock miners in Australia.

Some analysts are now forecasting a surplus of lithium over the next two years.

Fears of future shortfall, meanwhile, have been damped by the prospect of much higher production in Chile, which sits on the world’s lithium mother-lode in the form of the brine lakes in the Atacama Desert.

Chile was the world’s largest lithium producer in 2016 and has the largest known reserves in the world, according to the United States Geological Survey (USGS).

It also has ambitious plans to capitalise on its geological good fortune by building out a downstream processing and battery industry.

However, both Chilean aspirations and future global supply stability are beholden to a battle for control of the country’s biggest producer, SQM.

THE MAN WHO WOULD BE LITHIUM KING

The news on Jan. 17 that SQM had received permission to lift its production capacity to 216,000 tonnes per year through 2025 sent a chill wind through the lithium investment space.

The Global X Lithium and Battery Tech exchange traded fund tumbled from over $40 to $35 in the following days. It has still not recovered its previous poise, last trading at $34.25.

Never mind that SQM will take years to translate higher quotas into higher production. The news acted as a reality check that Chile has massively untapped lithium potential.

The announcement of higher production quotas was the result of a peace deal between SQM and Corfo, the Chilean government agency that licences and controls the country’s lithium output.

The two entities had been locked in an acrimonious stand-off for many years.

At one level the dispute was conventionally commercial, Corfo accusing SQM of underpaying royalties.

At a more fundamental level it was about the role of one man, Julio Ponce, former SQM chairman and probably its largest shareholder.

“Probably” because SQM’s own accounts refer to “Mr Julio Ponce Lerou and related persons” holding a 29.97 percent stake via three complex, intertwined investment vehicle chains.

Just about any media reference to Julio Ponce includes the word “controversial”.

In a country still haunted by the years of military rule, the man who was General Pinochet’s son-in-law and used that position to become first the government’s representative on the SQM board and then its major shareholder in the privatisation process of the 1980s is, well, a controversial figure.

Moreover, by forming a shareholder coalition with Japan’s Kowa Group, he has been accused, not least by Corfo, of running SQM as a private fiefdom.

SQM has over recent years been bombarded with allegations related to its corporate governance, part of a drawn-out war of attrition to wrest the company from Julio Ponce’s control.

A battle was won with last July’s redrawing of the voting rights on the SQM board, effectively ending Julio Ponce’s grip on board decisions.

And the war seemed to be over with the January agreement between Corfo and SQM, the latter’s increased quotas linked to “an obligation … to strengthen its corporate governance”, including the appointment of two independent directors.

Julio Ponce, however, seems in no mood to step quietly into the background.

He and his brother Eugenio Ponce, also a former SQM chairman, have just been appointed as advisors to the board.

BATTLE FOR CONTROL

The appointments have not gone down well with the Chilean authorities, the country’s finance minister Felipe Larrain describing them as “imprudent”.

“We need to check whether it’s a violation of the contract or the spirit of the contract from the government’s point of view,” he said, referring to the January deal with Corfo.

His pledge to “protect the interests of the Chilean state” is a sign that the interests of state and the country’s foremost lithium producer are not yet conjoined.

Just to add extra spice to this board room drama is the presence of China’s Tianqi Lithium, currently kicking its heels waiting for approval to buy a near quarter stake in SQM.

The purchase of the stake from Canada’s Nutrien must get the sign-off from Chile’s National Economic Prosecutor’s office, known by its Spanish initials FNE.

FNE is a small agency with just 115 staff and a current head prosecutor who is about to step down in August, which means a highly uncertain timeline before it approves the deal or launches a full investigation.

MARKET CALM … FOR NOW

You won’t see any impact of these convoluted Chilean politics on the lithium price.

There isn’t, yet, an exchange-traded lithium contract through which investors can place their bets on the outcome of the Santiago stand-off.

Rather, prices track physical supply-demand cycles, which means that right now the price of larger transactions is holding steady and the Chinese spot price is edging lower, according to Metal Bulletin.

The Chinese average spot price last month was $21.38 per kilogram, down from over $26.00 at the end of last year.

The easier tone reflects the wave of new production coming from Australian producers and the processing adjustments needed to treat their hard-rock product, according to MB (“Battery Raw Material Market Tracker”, May 29, 2018).

It is forecasting lithium supply to exceed demand both this year and next but expects limited downside to pricing. With no market of last resort to deliver to, excess material will simply be soaked up by an expanding battery supply chain.

Because everyone now knows that the lithium story has only just begun and that the EV revolution is still only building momentum.

Supply has reacted, belatedly, to the first-wave demand impulse from battery-makers.

It will need to react again as the second demand wave builds.

Chile has a starring role to play in that second act. But if it is going to live up to its billing, it’s going to have to sort out who really controls SQM.